Preamble

The House met at Eleven o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

Orders of the Day — CROWN LESSEES (PROTECTION OF SUB-TENANTS) BILL

Order for Second Reading read.

11.4 a.m.

Sir Austin Hudson: I beg to move, "That the Bill be now read a Second time."
Every hon. Member at some time hopes to be fortunate in one of our ballots, and he is particularly fortunate if he wins the one for Private Members' Bills and, at the same time, has a subject which he wishes to bring before the House in the form of legislation. Therefore, I realise how fortunate I am. I am sorry to find that in October next it will be 30 years since I first entered this House, though, of course, there have been periods when I have not been in, but they have not been long ones. During that entire period this is the first time I have been fortunate in a ballot for Motions.
I think that the omens for this Bill are good. The first is that it is the first Bill to be printed in the Reign of our Queen Elizabeth. The second is that today is leap year day, 29th February.

Sir Lynn Ungoed-Thomas: A double first.

Sir A. Hudson: I have always been told that, if possible, a Private Member's Bill should fulfil three conditions: it should be non-contentious, it should remedy grievances and it should, if possible, be of some assistance to one's constituents. I hope to show that this Bill fulfils all those conditions. Despite its comparative length and complexity it does one thing and one thing only: it gives to the sub-tenants, in law known as mesne tenants, of houses or flats which happen to be built on Crown Lands the

same protection under the various Rent Acts as they would have had if their dwelling had not been so situate.
The Crown Lands in question are lands administered by the Commissioners of Crown Lands whose spokesman in this House is the Minister of Agriculture. They are lands belonging to the Duchies of Cornwall and Lancaster and certain lands belonging to Government Departments.
The position is that until recently everybody thought that these sub-tenants were so protected. The Commissioners of Crown Lands acted as if their direct tenants were so protected and so continued to treat them. However, in a law case, Rudler v. Franks, in 1947, it was laid down that the immunity of the Crown extended to these leases and subleases. May I say here that the direct tenant of the Crown probably does not even now know the position because the Crown still treats him as if he were under the Rent Acts. The position of the subtenant, however, is very different.
Certain people, seeing the implication of this judgment, started buying up these leases, putting up the rents and evicting tenants who would not or could not pay the increase. I have letters in my file here showing that this is the case. The properties in question, dealt with by this Bill, are nearly all in Lewisham, Woolwich and Greenwich, though there are a few in other parts of the country and in another part of London, around Regent's Park. That is the reason the Bill is backed by Members of Parliament for these districts, irrespective of party. The two constituencies most affected are my own, Lewisham, North, and Woolwich, West. The hon. Member for the latter constituency will second the Motion. In my own division there are 15 roads in which such properties are to be found, amounting in all to 1,300 hereditaments.
I raised the matter in the previous Parliament and was told that the Government were well aware of the problem and wished to deal with it as soon as Parliamentary opportunity arose. They were most helpful to me in my efforts to get something done. As regards the present Government, it must be obvious to Members of the House that I could not have produced the Bill, with its complicated drafting, unless I had had the


goodwill and friendly co-operation of the Department concerned.
When I was having the Bill drafted, I had obtained the King's Consent, and I am assured that the Queen's Consent will be signified on Third Reading. The change of reign means that we shall have once again to obtain the necessary Consent. I hope, therefore, in view of the fact that both Governments have been so helpful, that the House will agree that the Bill is non-contentious.
I should like now to turn to the Bill itself. In the last Parliament I had considered, in conjunction with my hon. Friend the Member for Woolwich, West (Mr. Steward) whether a 10-Minute Rule Bill could be brought in to deal with this grievance which is felt by our constituents. In our innocence we thought it would be a quite simple matter to draft the Bill. We thought that we could call it the Crown Tenants Bill and could have just one simple Clause to the effect that after the Bill became law, all Crown sub-tenants of the right description should be subject to the Rent Acts.
As will be seen, however, we now have a Bill of six pages, and I am assured by those whose business it is to know that the Bill must be drafted in this form. Even now, it is not in its correct and final form. Among other provisions under which we hope to bring these sub-tenants, the Rents Acts prevent a mortgagee from raising the mortgage interest.
We had to draft the long title of the Bill in a hurry, because it had to be submitted by a certain time at the beginning of the Session, and it is not wide enough to deal with these mortgagees. I therefore propose, if I am fortunate enough to get a Second Reading for the Bill, to put this right when we reach the Committee stage. It is quite simple to amend the long title in that way. This will have the added advantage of enabling us to simplify Clause 1 and to dispense altogether with the First Schedule. We can, and, of course, will, deal with the detailed wording of the Bill when we come to the Committee stage. The House will, however, expect me to go very shortly through the Clauses of the Bill.
Clause 1 puts Crown tenants under the various Rent Acts, but the proviso

in page 2, at line 11, confines the Bill to sub-tenants. The reason for this is obvious, because otherwise there would be all the difficulties of married quarters and 101 other things under which a direct tenant of the Crown, if included, would come. The direct tenants are well treated now, and if the Commissioners of Crown Lands started to be bad landlords, we could always hunt the Minister of Agriculture in the House. That is the reason for confining the Clause to subtenants.
Clause 2 applies the Rent Acts to Crown houses in the same way as the Rent Acts now apply to houses which were brought under control in 1939, with the necessary adaptation as to dates. Most of the adaptation as to dates will be found in the Second Schedule. As regards "standard rent," we felt that we could not go right back to 1st September, 1939, for the date from which the standard rent should be taken. We therefore adopt a formula that the standard rent is to be
the rent at which the dwelling-house was let on the critical date.
Those words will be found in Clause 2. The critical date for a house now let is to be the date on which the Bill was published—8th February. The critical date for a house let after 8th February but before 1st September, 1952, when it is proposed that the Bill will come into force, will be the date of that letting. The third critical date, after 1st September, 1952, would be the actual date of the letting.
It is important to note that the fact that in the Bill we have fixed 8th February, 1952, and not 1st September, 1939, is not wholly to the advantage of the landlord and to the disadvantge of the tenant, because where the critical date falls in a letting which began after 1st September, 1939, the tenant may apply to a rent tribunal to determine a reasonable rent if he feels that his rent is not a just and fair one. I am also informed that an increase of rent during this period, about which so many letters have been sent to me, either immediately before 8th February or round about that time, institutes a new letting and, therefore, gives a tenant the opportunity of going before a rent tribunal and having a reasonable rent fixed. This is nothing new; it is in line with the Landlord and Tenant (Rent Control) Act, 1949.
As regards Clause 3, which deals with the short title and so forth, we chose 1st September, 1952, as the date for the coming into force of the Bill in order to give everybody an opportunity first of seeing the final Act and deciding how it affects them. One is tempted to choose, perhaps, the end of July or a like time as the earliest possible date for the Bill, after completing all its stages, to become law. But the House has always wanted to be fair and to give a reasonable opportunity for legislation to be studied by those affected by it. In this case, a reasonable opportunity is given both to landlords and to tenants to see how the Bill affects them before it actually becomes law.
A tenant is protected from an unreasonable increase of rent between 8th February and 1st September, because, I am informed, he can recover illegal increases by going to the county court after the latter date. I can, however, think of no provision which we could put in the Bill which would prevent a tenant from being evicted in a harsh and unmerited manner by an unscrupulous landlord between these two dates. In such a case, I can only ask the Minister, who is represented here today by the Parliamentary Secretary, to use such powers of requisition as he already possesses, and as he has already used on appropriate occasions, in these cases of Crown tenants. If he can announce that he proposes to do this, he will prevent the will of Parliament from being frustrated in that way. I do not believe that we can put anything in the Bill which can prevent that, although, as I have said, any unjust increase of rent can be dealt with, because after the Bill becomes law a tenant can recover the rent if he can prove his case.
The First Schedule will disappear when we simplify Clause 1 and include the mortgagees. The Second Schedule fits in the provisions of the Bill with other Acts of Parliament, particularly as to date. In the subsequent stages of the passage of the Bill, I shall want the sympathetic assistance of the lawyer Members of the House. I am receiving it now and I feel sure I shall receive it then. If I have persuaded the House that there is a genuine grievance to be remedied and that this Bill will provide a remedy, I hope that they will give it a Second Reading.

11.20 a.m.

Mr. William A. Steward: I beg to second the Motion.
I am very proud to have the opportunity of doing so because, if this Bill becomes law, it will bring a great deal of relief to many people in my constituency. There are 3,000 separate houses in that part of the Borough of Woolwich which I have the honour to represent, all held remotely under the Crown and all subject to the very injustices which this Bill is intended to put right. Many of the sub-tenants have lived in their homes 15 to 20 years paying their rent at regular intervals, weekly or monthly, and feeling safe and secure. In a number of cases, suddenly, out of the blue, the main lease is sold and a new landlord comes along and proceeds to raise the rent under threat of eviction, or gives notice terminating the tenancy without even giving the tenant the option of paying the increased rent demanded.
The tenant is placed in an impossible position. He cannot get a house through the local authority because he is not on their housing list; he has had no reason to think that it was necessary for him to get on the housing list. If he appeals to the court, or waits until the landlord takes steps to evict him, he finds that the judge is kind and sympathetic, but absolutely powerless to do anything but issue an order for eviction. When evicted he has one course open to him—to apply for rest centre accommodation. His wife goes into an institution, where only his wife and young family can be admitted, and he has to seek lodgings elsewhere. He is thus parted from his family and wife, probably for the first time since being married.
In the meantime, the landlord sells the property with vacant possession at an enhanced value, or re-lets at a very much increased rent and thus prospers while others suffer. Under the present law a deserving section of the community who have done nothing to warrant being singled out for persecution are suffering daily under the immunity enjoyed by direct lessees of Crown property. Old age pensioners, honest working men, widows and the like have to my knowledge been treated in the same callous manner. It is monstrous that this situation should be allowed to continue and, thank God, this Bill, if it passes through


this House, will put an end to such practices. The provisions of this Bill, rightly, do not apply when the Crown is the immediate landlord. From personal experience I know the Crown would never stoop to such practices as I have mentioned. I ask the indulgence of the House while I attempt to describe what is actually happening in my constituency.
I know of a property owner, a married woman, who since the war has purchased 12 residues of Crown residential properties with the tenants in them. Many were long standing and at least one has lived there for 18 years to my knowledge. Hon. Members will be aware that houses bought with tenants in them do not fetch very high prices and in the case I mention the average of £800 was paid for each house.
A plan was then embarked upon to evict the tenants and re-sell with vacant possession, or re-let at the highest rents which could be obtained. As the House well knows, this is perfectly legal as the law stands today. So far five tenants have been evicted. Some houses have been sold with vacant possession at a profit of 100 per cent. on the capital outlay and others have been let for as much as six guineas a week, unfurnished, which is a very high rent for West Woolwich.
Three weeks ago this property owner brought court proceedings against a tenant for possession and I asked the local authority to use their powers of requisition to prevent this hardship, which involved a working man. Thereupon the property owner gave the local authority, quite voluntarily, an undertaking that she would live in the house herself when she got possession. As to my knowledge she has lived, or purported to live, at no less than six addresses—all her own property—during the last three years, hon. Members will not think me unduly sceptical when I say there may be a token possession, that is to say, a chair and table and a few odd bits of furniture will be put in the house for a week or two to comply with the undertaking given. After that no one can say her nay.
The injury to the most unjustly treated tenant is further increased by reason of the fact that his landlord, demanding possession of an unprotected property, was

able to ask for and to obtain costs on her successful action—another serious financial burden on an already unfortunate tenant. The grim irony of the situation is that, had the tenant not gone to court but quietly vacated at the demand of the landlord, he would not have been able to ask the local housing authority even for rest centre accommodation.
All this is done—this harassing and racking of tenants, evictions, extravagant if not extortionate increases of rent—in the name and under the cloak and authority of the Crown, the court of justice, the pattern and model of the good landlord, as indeed all men know the Crown, in its relationship with its tenants, is exemplary. But by what stretch of fantasy can the landlord I have described masquerade in court that she is outside the scope of the law? She has the seal and authority of the Crown. She can evict and sell over the tenants' heads. She can raise rents for no rent tribunal dare interfere with her. Justice is withheld from and denied to some thousands of innocent, hardworking and deserving people and it is denied in the name of the Crown. Let the House end this travesty, this gross anomaly, this ugly parody of our temperate and humane laws.
I hope the Parliamentary Secretary will agree to take action if head tenants or landlords wishing to avoid their houses being rent controlled proceed to dispossess their tenants prior to the operation of this Measure. There will be many smart Alec landlords with equally smart lawyers ready to explore every avenue in order to get out of the provision of this Measure before it conies into operation. This Bill should receive the wholehearted support of both sides of the House, for it has no political tag but is a humane step which should have been taken long ago.
Whilst in principle I am strongly opposed to retrospective legislation, I must confess that in my heart I sincerely wish that the date of 8th February, 1952, could be amended to read 8th February, 1951, or even before that. That would give an opportunity of putting right much grave wrong done to so many who have suffered through such a Bill as this not having already become law. I support this Bill in the fervent hope that it will become law as speedily as possible.

11.30 a.m.

Mr. David Weitzman: Everyone in the House will undoubtedly be in entire agreement with the object of this Bill. It is an absolute scandal that there should be the buying up of properties exempt from control because of an interest held by the Crown and an attempt made by the landlord to take advantage of the position by making these ill-gotten gains.
As I say, I agree wholeheartedly with the object, but I hope that I shall be not taken to task if I make one or two criticisms of the Bill. The hon. Member for Lewisham, North (Sir A. Hudson) said something about advice being given to him that the Bill could not be drafted in the form of what one might call a simple-sentence Bill. I have looked carefully through the Bill, and frankly I see no reason why a Measure very much more simply drawn could not have been placed before the House.
Why a Bill should not have been introduced which simply said that the Crown should not be exempt with regard to its properties from the application of the protective rights and benefits given by the Rent Restriction Acts, I do not know. The hon. Member for Lewisham, North, has said that one has to take into account properties which are, for example, occupied by soldiers. A very simple exemption Clause could have been included in respect of those matters. I am a little terrified at the idea that a Bill of this kind, which is supposed to achieve a very limited object, should contain so many Clauses and be drawn in such intricate language. I hope that some attempt will be made to simplify it in the way which I have suggested.
I wish to make my second point very strongly. As we have heard, the intention of the Bill is to limit the relief given to sub-tenants and I think also to ex-tenants. I know it is said that the Crown is an excellent landlord, but one must remember that the Crown includes the Crown, the Duchy of Lancaster and the Duchy of Cornwall, and Government Departments. We may say that every Government Department will act in a proper fashion and will not attempt to extort rents that should not normally be claimed. Government Departments sometimes act wrongly, however. I have known Members of the House criticise

Government Departments in regard to certain matters.
Why should it be assumed that a Government Department will always charge a proper rental in respect of the letting of premises that come under that Department? If it is proper to argue that the benefits and protection of the Rent Restriction Acts ought to be given to subtenants and ex-tenants, why should that benefit and protection not also be given to direct tenants of the Crown.
I cannot see the justice of saying that in the one case sub-tenants ought to be protected but that tenants of the Crown directly ought not to be protected. I hope that that position will be remedied. Otherwise, the provisions of the Bill will be confined to a very narrow compass. The proviso to Clause 1 enacts that limitation. I hope that that proviso will disappear when the Bill is considered in Committee.
A further difficulty that might arise is that if the Crown or one of these Government Departments get possession from the tenants, then the Crown or that Government Department or the Duchy becomes the landlord of the sub-tenant, and the sub-tenant will not then enjoy the protection and privileges given by the Bill. We ought to guard against that danger, and I hope that provision will be made in that respect.
If one looks at Clause 1 (1, b) dealing with the prohibition with regard to requiring premiums as a condition of the grant, renewal or continuance of tenancies, I would point out that, unlike the main Act of 1949, to which it is supposed to refer, it makes no provision for the recovery of premiums where there is an assignment by the sub-tenant. That, too, is a difficulty which should be dealt with by the Bill.
A curious point arises under Clause 2 (2) where the definitions of tenant and landlord are dealt with. Under the 1949 Act there is the prohibition against premiums being charged for the continuance of tenancies or the assignment of tenancies, etc. A difficulty has arisen in law from the fact that very often a person who has negotiated a transaction and has received the premium cannot be proceeded against for the recovery of the premium because he is not the landlord or tenant. I notice that that difficulty has


been dealt with in the Bill but it raises a curious anomaly.
I have always understood that a Private Member's Bill should deal with a limited object and should not, as it were, try to correct some defect that exists in the general law. I believe, in regard to premiums and their recovery, that where an agent negotiates a tenancy and receives the money, it is wrong that he should get away with it and be able to retain that premium.
What is being done in the Bill—and it is a good object—is to give the right to recover that premium from the agent. The result will be, however, that in this limited case a person will have a right to recover the premium from the agent, whereas under the general law he has not got that right.
Finally, I wish to refer to Clause 2 (2) and to make a strong point in showing how cumbersome the Bill is as drafted and how difficult it will be to interpret. I should like to read that subsection so that Members can appreciate the position. It begins in extraordinary fashion with the words "For the avoidance of doubt." One would have thought that something simple would follow, but let me read it and let us see what it means. It states:
(2) For the avoidance of doubt it is hereby declared that the provisions of this Act are not such a limitation of rent as is mentioned in paragraph (b) of subsection (7) of section one of the Landlord and Tenant (Rent Control) Act, 1949 (which paragraph excludes the operation of that section while a limitation of rent is in force which is imposed by or under certain enactments), and the provisions as to standard rent of the said Act of 1949 apply where the standard rent is determined, in accordance with subsection (1) of this section, by reference to a letting (whether of the dwelling-house in question or of a property of which it forms part) beginning after the first day of September, nineteen hundred and thirty-nine, as they apply in any other case such as is mentioned in subsection (1) of section one of that Act.
I have listened very carefully to the speeches of the hon. Members who moved and seconded the Motion for the Second Reading. I heard the hon. Member for Lewisham, North, say that he was going to explain the Clauses of the Bill, and I hoped that he would deal with that one. I went through it carefully and tried to see what it means. I can put two or three possible explanations on it, all of which are probably wrong, but for

the life of me I do not know with any degree of certainty what it means.
I hope that I shall not be thought guilty of captious criticism. I have some recollection of the Workmen's Compensation Act, and how it was said that it was a very simple Act and that the lawyers would have nothing whatever to do with it. I remember, and the House will know, of the wealth of learning which grew up on practically every single sentence of that Act. This is another rent Bill; and when one looks back on the Rent Acts, beginning, I think, in 1915; when one looks at the number of cases which have gone to the Court of Appeal and how almost every single word of them has been argued and discussed from one angle and another, I am sure that the hon. Member who moved the Second Reading Motion would not like to think that he has added yet another Bill to the chaos of the previous Acts, which will certainly allow the lawyers to obtain—and I make the point despite my profession—a very good living from the interpretation of these provisions.
That is not the idea of this Bill. It has a very limited object. I suggest that pains might be taken to convince even the draftsman who gave his very helpful assistance of the necessity to simplify it very considerably so that the difficulties I have referred to do not arise. The hon. Member for Woolwich, West (Mr. Steward) spoke about some court proceedings for the recovery of possession of premises of this kind by unscrupulous landlords. Just think of the proceedings being brought in the county court and the days of argument regarding what the details of this Bill really mean.
I offer this criticism, I trust, in a helpful way. I think this is a small Bill meant to achieve a very good object. But I do hope that some effort will be made to simplify it so that it sets out in ordinary English which any subject of Her Majesty can understand what that object is and that some effort is made to meet the criticisms I have made.

11.43 a.m.

Mr. John Hay: The House will regard with the utmost sympathy the intention of my hon. Friends in bringing forward this Bill. We all welcome their very gallant attempt to rectify what is


quite obviously an anomaly in the law relating to the Rent Acts, an absurdity which, as my hon. Friend the Member for Woolwich, West (Mr. Steward) has said, has created undoubted hardship.
But while we congratulate them upon what they are seeking to do, we can commiserate with them on the enormity of the task they are undertaking. As the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) has said, one criticism which can be brought against this Bill is the enormous complexity of the language. It is a complicated Bill. It seeks to do something which anybody in this House could state quite shortly in ordinary language. But while, as a lawyer—not, I hope, one of the "smart Alec" lawyers referred to by my hon. Friend the Member for Woolwich, West—I rub my hands at the prospect of the litigation which undoubtedly will come out of this Bill, as a legislator, I feel quite incensed at the fact that yet another one of these Rent Acts is on the way to the Statute Book.
The Rent Restriction Acts are a mass of chaotic piece-meal legislation. Anyone who has anything to do with them inherits a headache he would like to get rid of. It has really become a farce. Nothing has been done by this House or by successive Governments to clear up this mess. Judges are in great difficulty over the Rent Acts as a whole, and I hesitate to think what their opinion will be unless we do some pretty drastic pruning of this Bill when it gets to the Committee stage.
Lord Justice Mackinnon once remarked that the Rent Acts were a chaotic series of Acts which were prematurely hastening judges to an early grave. Lord Normand once said the Rent Acts were a by-word for confused draftsmanship. Lord Justice Scrutton once regretted that he could not order the costs to be paid by the draftsmen who compiled the Acts and the legislators who passed them. That is a point which my hon. Friend the Member for Lewisham, North (Sir A. Hudson) might remember in future.
I am glad that the Parliamentary Secretary is in his place this morning, because I wish to put a question to him in general terms before discussing the Bill. In view of the fact that we have this chaotic situation with regard to the Rent Restriction Acts, extending from

1920, now on the Statute Book, when can we expect the first step to be taken towards the consolidation of the Rent Restriction Acts? Sooner or later Parliament has to amend the Rent Restriction Acts. I should be ruled out of order if I attempted to discuss that this morning, but let me say this in connection with this Bill. If, eventually, someone takes his courage in his hands and amends them, the first thing to be done must be to have the Acts consolidated so that we start with one main Act which can then be amended.
It is often said that we cannot possibly consolidate the Rent Acts, because it is an enormous and impossible task. People said the same thing about the Income Tax Acts, scattered as they were over a series of Finance Acts of many years. But that job has been done. The Income Tax Consolidation Bill is going through the House at the present time, and that does seek to consolidate the Income Tax Laws. If it is possible to do that for the law relating to Income Tax why should not it be possible to do it for the Rent Restriction Acts? I suggest that we have to do something about that, and I would ask the Parliamentary Secretary, if he is to speak in this debate, to give us the benefit of his opinion on that point.
I wish to follow a point made by the hon. and learned Gentleman for Stoke Newington and Hackney, North with regard to the ambit of this Bill. In moving the Second Reading my hon. Friend the Member for Lewisham, North made it clear that his intention was to deal only with the position of sub-tenants of Crown property. I must confess I was a little mystified when I realised that apparently it was not intended to deal with the position of direct tenants of the Crown. My hon. Friend skated over the difficulty which might arise if ordinary Crown tenants were included with an agility which did him credit, but he might have considered that a little more closely.
After all, there is not the slightest reason why one should accept the position that the Crown will always be a good landlord. Often in practice the Crown means a Government Department, and often in practice a Government Department means some quite obscure local office of the Department. Frequently—I have had no personal experience of this,


but I am convinced that it happens—local offices of Government Departments, acting in the name of the Crown, are extremely tyrannical in the way they deal with the subject. There is always the remedy which the subject has of bringing his trouble to us in this House, and we can cross-question Ministers about it. But that is a cumbersome way of dealing with the matter, and I suggest we ought to consider whether we can include the ordinary direct tenant of Crown property in the ambit of this Bill.
The Rent Acts at present provide safeguards and protection for sub-tenants, but do not cover all the cases of sub-tenants of the Crown which we are told already exist. Why should not the Crown be brought within the ambit of the Rent Acts? Quesions of protection against eviction, against increases of rent, taking premiums and all the rest of these things are already dealt with in the Bill, so why should not the Crown be bound as is the private tenant?
There is one further point to which I want to draw attention. Lawyers in the House will recollect that the Rent Acts operate in rem in regard to the property; that is to say, as far as the buildings themselves are concerned and not as concerns the people who occupy them. What will be the position under this Bill? I can see what my hon. Friend wants to do, but it has been clearly stated that, so far as Crown property is concerned, the Rent Acts operate on the property, and, once the Crown has had an interest in a house, automatically, the Rent Acts are excluded.
Now, my hon. Friend comes along with this Bill and says that, if there is a subtenant, we must protect him and make him subject to the Rent Acts protection, but what will be the effect on those cases in which the Rent Acts operate in this particular way? The effect will be that, as far as these sub-tenants are concerned, the protection will apply, and that in the case of other tenants it would not apply. What will happen in regard to the interpretation of that rule if this provision goes through, with its effect of bringing subtenants of Crown property within the ambit of protection?
I want to add another point concerning the standard rent provisions contained in the Bill. Since the 1949 Rent Control Act is to apply, it means, as my hon.

Friend the promoter of the Bill has said, that the tenant can go to the rent tribunal and ask for the tribunal to fix a reasonable rent. It is all right up to that stage. When the tribunal fixes a reasonable rent, because of the provisions of the 1949 Act that reasonable rent immediately becomes the standard rent of that property, but the proviso to Clause 2 (1), as I read it—and I agree with the hon. and learned Member for Stoke Newington that it is very difficult to follow what the draftsmen mean in some of these Clauses—that proviso, in my opinion, purports to fix the standard rent.
What is then the position? We should then have a variance between two Clauses of the Bill. On the one hand, the 1949 Act gives the tenant the power to go to the rent tribunal, and that tribunal having fixed a reasonale rent, that rent becomes the standard rent. On the other hand, Clause 2 (1) states that such and such an amount shall be the standard rent. The effect might easily be that the tribunal's jurisdiction would be ousted.
When that point was raised earlier, my hon. Friend indicated that he thought the tenant would be able to go to the tribunal, but he ought to look at that point, because it is quite possible, if my contention is correct, that the rent tribunal would have no jurisdiction in the matter at all. They would be entitled to say that, by the Crown Lessees (Protection of Sub-Tenants) Act, Parliament had fixed the standard rent and that therefore the application must be dismissed. I suggest that that point ought to be investigated.
I hope that the Parliamentary Secretary will exercise with care, and very sparingly, the powers of requisitioning where cases of eviction take place. I have every sympathy with these people who are evicted in this way because of this anomalous position of the law. They have no protection, but I hope that no administrative action would be brought into play, where the law happens to provide the opportunity, until such time as Parliament has attempted to put the matter right.
My hon. Friend the Member for Lewisham, North said that the intention was to leave the coming into force of this Bill until September next, and he asked that, in the meantime, the Ministry of Housing should exercise their requisitioning powers. I see no reason why this


Bill should not come into effect immediately on receiving the Royal Assent. After all, these people who are concerned with Crown property, whether as direct tenants or as sub-tenants, will have a lively interest in this matter already. No doubt, reports of this debate will appear in the Press and be given on the radio, and my hon. Friend has said that he has already received a great deal of correspondence about it.
I see no reason why the date of operation of the Bill should not be brought forward to the date when the Bill receives the Royal Assent, rather than have this very unsatisfactory situation of my hon. Friend being required to snoop about and make requisition orders if he is satisfied that, in some case, somebody is unjustly affected and is not now given protection in the way the Bill gives protection. Let us make this protection start with the Royal Assent, and let us bring that Royal Assent forward as quickly as we can by giving this Bill a speedy passage through the House.
I have one final point. As I understood him, my hon. Friend said that as far as protection against eviction is concerned, people who have been sub-tenants of Crown property and have been evicted before the Bill reaches the Statute Book will be included in the protection which it gives. That is what I understood him to say.

Sir A. Hudson: I was dealing with increases in rent. If they had increased the rent, they could then go to the court.

Mr. Hay: I am greatly obliged to my hon. Friend. The fear I had was that possibly in the meantime interests might have been created by reason of this anomaly which would have to be disturbed if this protection was ex post facto conferred on the tenant.
I will say in conclusion that, though this is a good Bill as it stands, it can be enormously improved by attention to the draftsmanship during the course of the Committee stage. It will undoubtedly do a great deal to help a very deserving type of person who finds himself by reason of this lacuna in the law placed in an intolerable situation. I believe that my hon. Friends have done a great service in devoting the opportunity which the luck of the draw has given them to bringing

forward this Bill, and I am certain it will have the unanimous approval of the House.

11.59 a.m.

Sir Patrick Spens: I want to add only very few words to what has been said by my hon. Friend the Member for Henley (Mr. Hay).
I would start by emphasising the main point that, while this Bill is obviously filling up a gap which became evident to all of us when dealing with recent leasehold Measures in this House, it is again only another patch in the whole pattern. It is really absolutely monstrous that this House should be called upon to go on producing a quilted patchwork in this way in relation to the whole of our leasehold problems in this country. It is scandalous for the layman, and I am fortunately in the position in which I can consider the layman a great deal more than a professional lawyer.
I want to say that it is not only the consolidation of these Acts that we want, but consolidation with a view to Amendment, and I am not at all sure that consolidation in regard to this group of legislation is really going to help at all.
I believe that we have got to have a completely new leasehold Measure, and a major one, starting right from the beginning and try to rid ourselves as much as we possibly can of a great many of the restrictive ideas contained in this batch of legislation. I would remind the Parliamentary Secretary that the two-year period of our last leasehold Measure passed by the late Government is running out. It is an immensely large subject, and there has got to be a new Measure within those two years. Such a Measure ought to be one for which every lawyer and layman interested in this subject is crying out
I want to deal again with the second major point. This Bill is not drafted to bring in the direct tenants of the Crown. It is perfectly true that at first sight that seems to be anomalous, but one has to remember that whereas every other relation of landlord and tenant is between individual and private citizens for which no Minister can be made directly accountable, direct tenants of the Crown are a class quite unique because their landlord, whether it be the Duchy of Lancaster, the Duchy of Cornwall, or a


Government Department can be chased in this House by their Member of Parliament in a way that does not exist in regard to any other private tenancy between parties.

Mr. Weitzman: Is that because the Crown can do no wrong?

Sir P. Spens: The Crown can indeed do wrong.
The only statement with which I think I disagreed was the idea that the Crown was always an ideal landlord. I know many cases where it has not been the most ideal landlord, but where either a letter to the Department concerned from a Member of Parliament or a Question asked in this House gives a direct remedy to the tenant outside the law courts, and it is sometimes a great deal cheaper to be able to proceed in that way than by the ordinary legal practice. Therefore, there is a great deal to be said for regarding those tenants as a class a part.
There is, I think, a serious technical difficulty in that the Bill having been drafted in this way and introduced, and having been given its Short Title as a protection of the sub-tenancy Act, there may be great difficulties, even on Committee, if we come to the conclusion that it is desirable to extend it to direct tenants. But there is the more important difficulty of all. From the discussions which we had in dealing with the last leasehold Bill, it was quite obvious that in regard to direct tenants of Government Departments, in particular, more than the Duchy of Lancaster or the Duchy of Cornwall, there would have to be so many exceptions from the provisions of these protection Acts that I believe we should get a Measure almost too complicated to handle in a Private Member's Bill.

Mr. Hay: I well remember the discussions which the hon. and learned Gentleman mentions, but I am wondering about the points of exceptions. The only major exception I can think of is the one mentioned by my hon. Friend the Member for Lewisham, North (Sir A. Hudson), namely, married quarters occupied by soldiers, sailors or airmen and their families, and there, surely, the general law under the Rent Restrictions Acts as to a service occupant would come in. I

cannot think of any other exceptions that one would need if one agreed the general principle.

Sir P. Spens: If it really is necessary to introduce an Amendment, no doubt somebody will do it. The point will have to be thrashed out in Committee, but I do not think that on Second Reading one ought to go into too many details. The view I have provisionally formed is that it would be very difficult to make certain that we were not introducing a good deal of trouble if we tried to introduce direct tenants who, I think, are reasonably well protected by the Parliamentary procedure available to them.
The hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) referred to the question of premiums. I am bound to say, not having seen this Bill in detail until a very short time ago, that he has discovered a point which defeats me. If it is in fact in the Bill that we are making a provision as regards premiums which is going to apply to the transactions under this Bill, and which does not apply generally, then I am inclined to think that the suggestion in this Bill, as indicated by the hon. and learned Gentleman, is a good one. As we are dealing with this patchwork quilt, as I say, it will be one more anomaly, but it will not be unique or alone in the whole of this lot of legislation. If it is right that it should be done, then I think we ought to make a start with it, and it may have the result of another Amendment being introduced at a later stage.
I will end by saying that this is a Measure which has not been cried out for over any long period of time, because it was not necessary until a certain decision was given not so very long ago. It ought to have been dealt with as soon as that decision was given, and I congratulate my hon. Friends the mover and the seconder for having taken this opportunity to get rid of this anomaly.

12.7 p.m.

Sir Lynn Ungoed-Thomas: May I also join in congratulating the hon. Gentlemen the mover and seconder of the Motion on bringing forward this Bill? I think I can speak for everybody on this side of the House in saying that we very much welcome it. I must say that I was a little


entertained when the hon. Member for Lewisham, North (Sir A. Hudson) contemplated that he might have a simple little Bill. I could not help observing the knowing Chancery smile on the face of the hon. and learned Member for Kensington, South (Sir P. Spens). If the Common Law really thinks that it can produce a simple little Bill to deal with anything inside the Rent Restrictions Acts, then I hope that such a proposal will be brought forward in Committee, when we shall have a most fascinating lawyers' orgy.
In principle, we on this side of the House are opposed to any privileged position, whether of the Crown or anybody else. I want to quote, because it puts it very clearly, from the interim Report on Leasehold Reform, when Lord Uthwatt was chairman of the Committee, which was signed by hon. Members opposite as well as by hon. Members on this side of the House, and which lays down the principle which I suggest we should follow in this Bill. Speaking of the Crown and other similar authorities, paragraph 89 of the Report says:
It is a broad question of policy how far authorities of these kinds should be exempted from legislation which applies to the ordinary citizen, but for the Committee's purposes we see no reason to exempt them from the principles of the scheme except where a case can be made for exceptional treatment for the purpose of distinctive statutory functions.
That, to my mind, is a salutary principle to be applied wherever exemption for the Crown is claimed. Indeed, it was in accordance with that principle that the Labour Government, in 1947, brought forward the Crown Proceedings Act which, for the first time, made the Crown liable to be sued and liable in tort in the same way as the private citizen. But it is a corollary of that, of course— we must have a balanecd view of this—that where there is a purpose to be carried out, then power must be conferred for that purpose and any necessary exemption must be conferred for that purpose, the principle being that any privilege or exemption must be limited to but conferred for the purpose for which it is necessary.
May I, in an aside to the Parliamentary Secretary to the Ministry of Housing and Local Government, say that that is why I, personally, deplore the Ministry's

policy in inducing local authorities to sell houses when they should be available for renting from time to time to the citizens who need them and for whose benefit the powers of local authorities were conferred.
The great point which has rightly emerged on the Second Reading of this Bill is the big question of principle, whether this exemption from the Rent Restrictions Acts should be preserved to the Crown or whether it should be abolished. Now in the present position it has got as far as this; that where the Crown has any interest in the property—even when the Crown is only the ground landlord—the occupying tenant from a mesne landlord, not direct from the Crown, is exempt from the Rent Restrictions Acts, which quite obviously, on the face of it, is wholly unnecessary. It does not affect the position of the Crown and it stultifies the object of the Rent Restrictions Acts. Quite clearly we all agree that this Bill is to be welcomed because it does away with that anomalous and unnecessary position.
Now we come to the position where the Crown is the direct landlord of the occupying tenant—and that is the point raised by the hon. Member for Henley (Mr. Hay) and mentioned by other hon. Members. On principle, I should be in complete agreement with the hon. Member for Henley. I see no reason at all in principle why, where the Crown is the direct landlord, the Crown should not be subject to the Rent Restrictions Acts in the same way as any other landlord. The difficulty we have is precisely the practical difficulty, which is so much in the knowledge of the hon. and learned Member for Kensington, South, of specifying and making the exemptions.
The hon. Member for Henley mentioned married quarters. But there might be all kinds of lettings—for instance, a temporary letting where a house is required for a short period and where it is not inconvenient for those concerned that it should be a short letting. Nevertheless, if exemptions are not made, it would mean that though the Crown would require the property for a statutory purpose in the interests of the country, it would find that if it let the property it would be caught by the Rent Restrictions Acts. Therefore, the Department might decide


not to let the property at all and that would not be in anybody's interest. I should welcome any proposal for bringing in a remedy, provided it can be done in a clear manner which would not involve a cumbrous series of exemptions.

Mr. Hay: The hon. and learned Member has just mentioned the possible exemption which might be required in the case of premises let for a short period for some statutory purpose. Would he not agree that one of the ways round that would be simply to carry out the First Schedule to the 1933 Act, making such a situation ground for the court granting an order for possession?

Sir L. Ungoed-Thomas: That, again, would mean applying to the court, and that is the difficulty. This very problem was considered in another context in the Leasehold Committee from which I have already quoted. The difficulties of specifying exemptions in such a way as to ensure that statutory purposes are carried out without hindrance are in fact very formidable. If the hon. Member for Henley or anybody else brought forward in Committee a Clause which would do it very clearly and simply, I should welcome it, but I agree with the hon. and learned Member for Kensington, South that the difficulties are indeed very formidable.
I join with the hon. Member for Lewisham, North and the hon. Member for Woolwich, West (Mr. Steward) in asking the Parliamentary Secretary that, if steps are necessary to see that the purposes of the Bill are not defeated between now and the time when it comes into operation, he should not hesitate to take action. I am sure the House has been very much impressed by the instances given by the hon. Member for Woolwich, West. It is appalling that when there is a gap in the law, such as the one which this Bill will attempt to fill, one immediately finds tearing through that gap gentlemen who seek to take advantage of it by exploiting, by speculating, by evicting, by stopping short at nothing, however cruel the result, in order to make some money out of it.
I am sure that that would be contrary to our purpose when dealing with the Bill, and I hope that the Parliamentary Secretary will take any steps necessary to prevent that condition of

affairs before this Bill comes into law. I have very much pleasure indeed in welcoming this Bill and in congratulating those fortunate enough to have brought it before the House.

12.15 p.m.

Sir Geoffrey Hutchinson: I should like to join with other hon. Members in offering my congratulations to my hon. Friends the Member for Lewisham, North (Sir A. Hudson) and my hon. Friend the Member for Woolwich, West (Mr. Steward) who have taken advantage of the opportunity which the Ballot has given to put right a matter which certainly stood in urgent need of correction.
In my constituency we have some Crown property where the difficulties to which my hon. Friends referred have certainly manifested themselves, though perhaps in a less acute form than they appear to have done in West Woolwich.
This Bill has been said by several hon. Members to be a very complicated Measure, and indeed it is. But I cannot find it in my heart to blame my hon. Friends for that, because I think some hon. Members have failed to realise that this Bill is necessarily complicated because it seeks to do something which, as far as I am aware, has not been done in a Rent Restrictions Act before. This Bill seeks to protect the sub-tenant whilst leaving the tenant of the ground landlord unprotected. That is a new departure in rent restriction legislation, and any new departure necessarily involves complications of the sort to which the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) referred.
I must admit that I do not share the admiration for the Crown as a landlord which some of my hon. Friends have expressed. I am inclined to agree that the Crown should be treated in the same way as other landlords. There is no reason, unless some special conditions exist, why different treatment should be accorded to the Crown. But, listening to this debate, I am bound to say that I think that it has appeared that the complications involved in extending this provision to Crown property would be so great that it is probably impracticable to do so.
It would be almost impossible to enumerate the classes of cases where the


Crown enjoy exemption. If it is to be done at all, it will have to be done, as so often happens in rent restriction legislation, by leaving it to the discretion of the county court judge. That is a very easy way out of the difficulty for this House; not quite so easy for the county court judges, although they have undertaken similar tasks in several other directions. This matter might be left to the county court judges they might be allowed discretion where the public interest was involved. But I am bound to say, having listened to the debate, that I think that my hon. Friend has made the right choice in restricting this Measure to sub-tenants.
I agree with what was said by my hon. and learned Friend the Member for Kensington, South (Sir P. Spens). The time has come when we ought to endeavour to simplify the Rent Restriction Acts if we can do so. Something more than consolidation is required. Consolidation is a comparatively simple matter, although, as a member of the Consolidation Committee, I should not encourage the House in the belief that it would be easy to undertake the consolidation of these Acts. Indeed, the result of the consolidation of these Acts might well be to make the task of those who have to advise upon them more difficult than it is at present.
My hon. Friend the Member for Henley (Mr. Hay) drew attention to the fact that rent restriction legislation applies to the premises as such and not to the parties who are interested in them. That is perfectly true. He asked what was going to happen, whether this Measure would abrogate the rule that the Rent Restriction Acts operate in respect of the premises and not the parties concerned. This Bill has been rendered necessary by the existence of that rule. It is, indeed, in order to withdraw Crown properties from the operations of that rule that my hon. Friend has brought forward this Bill.

Mr. James Hudson: I am a little alarmed at this plea that Crown property of all kinds should have no right of withdrawal from the Rent Restriction Acts. Am I to understand that there is now a claim being made that the piece of Crown property known as No. 10 Downing Street should be put in the same position as all other property under the Rent Restriction Acts? Has the

tenant now a permanent right of residence there, in view of the fact that the nation, as it will very shortly, will chuck him out?

Sir G. Hutchinson: I am sure that the hon. Member will appreciate that a great many other considerations arise in that case. The tenancy of that property is, after all, always in the hands of this House.

Mr. Geoffrey de Freitas: It is a tied house!

Sir G. Hutchinson: I have only one other observation to make. I share with some of my hon. Friends the doubts which they entertain about the wisdom of protecting tenants from eviction by the use of the Minister's powers of requisition. I have certainly no desire that tenants should be left at the mercy of landlords who take proceedings for eviction before this Measure becomes law. But the House should recognise that there is here a question of principle involved. The Minister was given these powers of requisition, not for the purpose of protecting tenants who might otherwise be evicted, but for the purpose of making available accommodation at a time when residential accommodation was in short supply. It is a dangerous thing where powers are given for one purpose to encourage the exercise of those powers for another purpose.
I would prefer to take the course which was suggested by my hon. Friend the Member for Henley and bring this Measure into operation as soon as it receives the Royal Assent. I see no reason why this Bill should be delayed for long in this House, and there is no reason why it should be delayed for long in another place. If my hon. Friend the Member for Lewisham, North, took that course, I think that all the tenants who might otherwise be evicted in the interim period would continue to enjoy their homes until this Bill comes into force.

12.27 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Ernest Marples): It might be convenient to the House if at this stage I made a short intervention in order to make known the Government's intentions on this Bill. It is significant and I think, ominous for my hon. Friend the Member for Lewisham, North (Sir A. Hudson),


who moved the Second Reading of this Bill, that the last five speakers have all been lawyers. One of them has been a judge; another is the former Solicitor-General, and others who have spoken belong to different branches of the law. If my hon. and learned Friend the Member for Ilford, North (Sir G. Hutchinson) thinks that in Committee there is a likelihood of this Bill being rushed through speedily, he has greater faith in his own profession than I have.
I think we should all congratulate my hon. Friend the Member for Lewisham, North first on having won the draw and having had the good fortune to be one of those hon. Members with the right to bring forward a Bill to this House, and secondly, on what I thought was a lucid introductory speech which simplified the complicated Clauses in the Bill and signified a very simple intention. I thought he was a little modest when he said that he could not have drafted this Measure without the help of Parliamentary draftsmen, and I must congratulate him and say straightaway that the Government give this Bill their support and will do what they can to help my hon. Friend to carry out the intention which he expressed in his introductory speech.
It is wrong that this anomaly should exist and that there should be a gap in the rent restriction law which has caused many families to be exposed to the anxiety of either a rent increase or eviction, when similar property nearby has received protection merely because the landlord happened not to be the Crown.
There is only one other point to which I shall refer and that is the question of those cases between now and 1st September, 1952, when the Bill, if enacted, will come into operation. My hon. and learned Friend the Member for Ilford, North suggested that the Bill should be amended so that the date can be brought forward, and I have no doubt that my hon. Friend the Member for Lewisham, North will consider that suggestion, but I think it will be found not to be practicable, because the Bill will have to be printed and made known to the public before it becomes law, in accordance with the wishes expressed in

this House in regard to all Measures. It seems to me that the earliest date at which it could be printed is round about August and, therefore, it could not become law until about September. If it is possible to bring the date forward, no doubt my hon. Friend the Member for Lewisham, North will look at that point.
If this proves to be impossible, my right hon. Friend the Minister of Housing and Local Government has authorised me to say that he has agreed to delegate to the local authorities the power to requisition houses occupied by tenants of the Crown in cases where that is necessary to avoid hardship—that is, between now and 1st September, 1952. I think that meets the points raised by the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas). It is perfectly true that the power of requisition is one not to be used lightly. But the period between now and 1st September, 1952, would be only a short one. The law would come into force then and I do not think that the use of the power in the meantime would create a breach of the principle so admirably expressed by the hon. and learned Member for Ilford, North.
As to the suggestion of the hon. Member for Henley (Mr. Hay) that there should be a consolidation of the Rent Acts, I will bring his observations to the notice of my right hon. Friend. I think my hon. Friend will sympathise with me when I say that I fervently hope that, if the Acts are consolidated, I personally shall participate very little in the Parliamentary discussions on the subject at the time.
Therefore, the Government support the Bill. They will use the power to requisition between now and 1st September, 1952, where necessary, but they hope that it will not be necessary, and that the warning that has been issued will be sufficient to deter unscrupulous landlords from using this period of time to evict tenants. I hope that I have clearly indicated the position of the Government on this Bill.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Standing Committee.

Orders of the Day — AFFILIATION ORDERS BILL

Order for Second Reading read.

12.32 p.m.

Mr. Robert Crouch: I beg to move, "That the Bill be now read a Second time."
This is undoubtedly the greatest day in my life, because it affords me the opportunity of introducing into this House a Measure which, if the House accepts it, will bring relief to the necessities of some of my fellow creatures, those fellow creatures being children who are unable to care for and look after themselves. It is not the fault of a child that it is born out of wedlock. The child's creation rests not with itself. At birth it is provided with a soul which, at the end of its life, it will again have to return to our Maker.
The difficulties of a child born out of wedlock are greater than those of a child born in wedlock because it misses the assistance and help given by the father. The cost of maintenance, whether a child is born in or out of wedlock, is in each case the same. After we reach the age of discretion, the State has no concern whatever whether we are born in or out of wedlock, and looks to us all to make an equal contribution to the affairs of the State. History has recorded that many men and women born out of wedlock made great contributions to the arts and sciences and did a great deal in their work in industry to build up this great country.
The purpose of this Bill is to bring the law relating to the maintenance of children born out of wedlock into line with that for legitimate children in regard to the maximum amount that may be ordered for maintenance by a magistrate's court and the age up to which maintenance may be made payable. The Bill is a logical sequel to the Married Women (Maintenance) Act, 1949, and the Guardianship and Maintenance of Infants Act, 1951, which deal with the position of the legitimate child.
It is a sign of our times that there should be a general wish that the interests of the illegitimate child should be safeguarded as much as those of the legitimate child, and it is hoped that the House will, by giving this Bill a Second Reading, approve the simple principle

of equality in the matter of maintenance. In the past, Parliament did not show itself so solicitous of the welfare of illegitimate children.
If one goes far enough back into history, one will find that an illegitimate child had, by the old law, no legal rights and owed no obligations to its parents, and that Parliament's main concern was directed to securing that the parish should not be damnified by the expense of looking after illegitimate children. It even went so far as to provide for penalties of imprisonment for women who gave birth to children born out of wedlock and caused expense to the parish. It was not until 1844 that a mother was entitled to apply for maintenance from a putative father.
As stated, the Bill is a sequel to the Acts of 1949 and 1951. The 1949 Act raised the maximum that might be ordered by way of maintenance for a legitimate child from 10s. 0d. to 30s. 0d. a week. The 1951 Act raised the previous maximum from 20s. 0d. to 30s. 0d. The present maximum in respect of a child born out of wedlock is 20s. 0d. a week. It was 5s. 0d. in 1872, it was raised to 10s. 0d. in 1918 and to 20s. 0d. in 1923. Clause 1 of this Bill will make the maximum 30s. 0d. a week.
Under the Act of 1872, maintenance ceased when the child reached the age of 13 years. Before 1949, an order for the maintenance of children under the Summary Jurisdiction (Separation and Maintenance) Acts ceased when the child reached the age of 16. The Married Woman (Maintenance) Act, 1949, provided that payments might be continued up to the age of 21 if the child were engaged in a course of education or training. Under the Guardianship of Infants Acts, there never has been a limit below the age of 21 up to which maintenance might be paid under an order, although no application could be made in a magistrates' court after the child reached the age of 16.
The first three subsections of Clause 2 bring the period for which maintenance may be ordered in an affiliation order into line with the period for the maintenance of legitimate children under the Summary Jurisdiction (Separation and Maintenance) Acts and the Guardianship of Infants Acts. I think that it is not generally known that under Section 5 of


the Poor Law Act, 1844, justices are empowered after the death of the mother to appoint some person to have custody of the child and that that person may enforce payments in the same manner as the mother. I believe that provision is seldom used, and the reason for its disuse is not by any means clear.
The law has provided in the case of both the legitimate and the illegitimate child that the National Assistance Board, or the local authority, or a fit person to whom the child has been committed by a court, or the managers of an approved school who have the custody of the child, may recover money towards the cost of maintenance from the person whose duty it is to maintain the child.
In the case of both the legitimate and the illegitimate child, the financial liability of a person ceases when the child reaches the age of 16. The Bill preserves that position as regards the illegitimate child, while allowing a public authority to benefit from the increase in the maximum amount of maintenance if it looks after the child. The relative position of legitimate and illegitimate children will remain unaffected by the change.
Under the present bastardy law, there are provisions which enable private persons who are looking after an illegitimate child by arrangement with the mother to have the benefit of an affiliation order. The rights of these persons are preserved in Clause 2 (7). The Acts of 1949 and 1951 contained provisions that payments under them should be made without deduction of tax. Clause 4 has the same provision.
The objects of the Bill are very simple, namely, to bring the law into line with current thought and to do for the illegitimate child what has been done by the Acts of 1949 and 1951 for the legitimate child. Some of its provisions, however, are rather technical. The reason for this is that the law relating to bastardy has very different origins from the laws relating to the maintenance of legitimate children as the latter arise from the relationship between husband and wife. To bring the two sets of law into line with each other is not as simple a task as would appear. However, it is not necessary to go into these technicalities at present. All this can be explained in

Committee if the House gives the Bill, as it is hoped it will, a Second Reading today.
Finally, I should like to thank right hon. and hon. Gentlemen on both sides of the House who have given me assistance in the preparation of the Bill, and I should like also to thank those organisations with headquarters in this great city who have also given me the benefit of their advice Without that help, I should not have been able to present the Bill in the way that I have done today. I have every reason to hope that, because of the support which has been promised me from all quarters of the House, the Bill will be given a Second Reading.

12.43 p.m.

Mr. Geoffrey de Freitas: I beg to second the Motion.
The hon. Member for Dorset, North (Mr. Crouch) has covered the ground so well that I need not make more than a short speech. Ever since I came to know the hon. Member two years ago when he entered the House I have been aware of his interest in the care of children. When I was Under-Secretary of State at the Home Office we were constantly discussing such matters together. It was no surprise to me that when he was successful in the Ballot he chose a subject such as this on which to introduce a Bill to improve the law.
Private Bills in the past, it appears from reading their titles, have been largely concerned with the care of the defenceless, whether people or animals. In the last Parliament the majority of the Private Members' Bills which were introduced concerned animals. To preserve a proper balance it is right that in this Parliament we should consider such an important matter as the care of children.
The hon. Member referred to a number of distinguished people who had been born out of wedlock. That is true, and it is right that we should remember that one of our very great kings, William the Conqueror, was himself William the Bastard. We ought to realise it and be frank about it. We should not treat this problem as our predecessors hundreds of years ago in this House treated it. The hon. Member referred to the fact that in the old days


Parliament was much more concerned with punishment and the relief of the parish rates. I have here the first Act on this subject passed by our predecessors in the 18th year of the reign of Elizabeth I. It says:
Be it ordained, declared and enacted by Authority of this present Parliament… concerning Bastards begotten and born out of lawful Matrimony (an Offence against God's Law and Man's Law), the said Bastards being now left to be kept at the Charges of the Parish where they be born…
It goes on
…That two Justices of the Peace … shall and may by their Discretion take Order, as well for the Punishment of the Mother and reputed Father of such Bastard Child, as also for the better Relief of every such Parish… by charging such Mother or reputed Father with the Payment of Money weekly….
Then it goes on to say that if they do not keep the order the
…Mother or reputed Father… shall… be committed to… the Common Gaol, there to remain without Bail.
There is not a word in it about the care of the child. One of the best things about living in this century is that we look at these problems from the angle of the care of the child.
In the 1945 Parliament this House, at the request of my right hon. Friend the Member for South Shields (Mr. Ede), passed the Children Act, which was another great step in showing the care which Parliament insisted the State should take of children. It was a sign of the wisdom of Parliament that it put the administration of the Act under the most ancient and senior Department of State, the Home Office. I feel I can say that in the presence of the former Home Secretary and my successor, one of the joint Under-Secretaries of State at the Home Office, since there is no hon. Member here with any past or present connection with the Foreign Office.
The Bill may be improved in Committee, but I feel that today—this is the Second Reading—we should concentrate on its good points. It is a good Bill. I often find that, if I talk too much, disagreements arise, and as I do not want to disagree with anything which has been said I end by expressing the hope that the House will give the Bill a Second Reading.

12.50 p.m.

Lieut.-Colonel Marcus Lipton: Like my hon. Friend the Member for Lincoln (Mr. de Freitas), I cordially support the initiative that has been shown by the hon. Member for Dorset, North (Mr. Crouch), in taking advantage of the good fortune which has come his way and which has enabled him to move the Second Reading of this Bill, which will, in a limited way, remove some of the anomalies that now differentiate between the legitimate and the illegitimate child. I do not like the word "illegitimate" as applied to these children and I wish some other adjective could be found to describe them.
No doubt the Under-Secretary of State is aware of a very useful report on the subject, produced by a joint committee of the British Medical Association and the Magistrates' Association. It is one of a series of reports produced by this joint committee, drawing attention to omissions and defects in the law. One report was about sexual offences, and the latest is on the law in relation to the illegitimate child.
It will be encouraging to the hon. Member for Dorset, North, to realise that this joint committee, consisting of responsible men and women from the two organisations, include in their recommendations a suggestion that the maximum amount that can be ordered by magistrates for the maintenance of an illegitimate child should be increased to the sum applicable in the case of children born in wedlock. For a short period only it was even possible to obtain more in a magistrates' court for an illegitimate child than for a legitimate child.
I hope that the Under-Secretary will hold out some favourable prospect of the Bill coming into law at an early date. There are other aspects of the law relating to illegitimate children which should receive the earliest possible attention. In that connection I would suggest to the Under-Secretary that if these other improvements cannot be tacked on to the Bill the problems involved might well be referred to the Royal Commission which is now considering the subject of marriage and divorce. In reply to Question No. 141 on 21st February, the Home Secretary stated:
The problem of the illegitimate child is linked with other questions of family life which fall within the terms of reference of the


recently appointed Royal Commission on Marriage and Divorce, and I think it would be wiser to await the Commission's report."—[OFFICIAL REPORT, 21st February, 1952; Vol. 496, c. 67.]
The Question asked the Home Secretary whether he would set up a committee of inquiry into the law relating to the illegitimate child.
I would commend to the favourable notice of the Under-Secretary of State, who is present today, the proposal that the Royal Commission which is now sitting should consider—it can hardly avoid doing so—some of the laws about illegitimate children. It would be economical of personnel and money to ask the Commission to undertake this further investigation, which would not involve a great deal of extra work but would ensure the subjects being considered and reported upon with reasonable speed.
Another point which might be considered in connection with the Bill relates to relief from taxation for putative fathers in respect of their payments for illegitimate children. The position is not clear, so far as the Inland Revenue authorities are concerned. In the kind of case we are considering, the father, possibly not being a married man, is unable to claim the marriage relief, and, the child not being legitimate, he is in some difficulty in claiming relief in respect of children.
Cases can occur in which a man is penalised twice. He pays under the order of the court but is denied any of the Income Tax relief that would be available to a married man maintaining a child of his own. Perhaps these are points for the Committee stage and I will not take up the time of the House further with them. It may well be that some of the other recommendations of the joint committee, if they do not involve any controversial points, could be incorporated in the Bill, provided that that does not hold up the progress of the Bill to the Statute Book. I hope that the Government will find it possible to provide the necessary facilities to enable the Bill to reach the Statute Book at the earliest possible moment.

12.58 p.m.

Mr. Lawrence Turner: I shall not seek to detain the House for more than a minute or two but, as one of the sponsors of the Bill, I want to support

it and to express the hope that the Government will feel able to provide an early opportunity for its Committee stage.
The terms of the Bill have been most ably stated by my hon. Friend the Member for Dorset, North (Mr. Crouch) who has taken us through complicated Acts of Parliament with great skill. The Bill has been seconded with the persuasion and the well-known legal skill of the hon. Member for Lincoln (Mr. de Freitas). The Bill has also the powerful support of the right hon. Gentleman the former Leader of this House and ex-Home Secretary, and that is a healthy sign which angurs well for it.
I ought to declare my interest in that there exists a body called The Fellowship of St. Nicholas, of which technically I am a director, and which, in places like Brighton, Hastings, and St. Leonard's, looks after just such children. Our fees, however, are the satisfaction of looking after these children; our dividends are the children; themselves.
In contrast to the thunder and intensity of our debates earlier this week, it is almost like a day of spring sunshine to be here this Friday morning taking part in a debate on such a Bill. It is surely a remarkable tribute to this House that, in spite of so much pre-occupation with our financial affairs, our defence arrangements and our industrial problems, we are yet able to find time to discuss the needs of small children who, as the Mover of this Motion said, are certainly unable to help or speak for themselves.
This Bill seeks to amend an existing Act and thereby to remove an existing anomaly. All hon. Members here desire to see justice done at whatever level. That is perhaps why we are here. However much we may differ in our views as to how justice may be done in the political scene, we are unlikely to fall out over a Bill of this character which simply seeks to bring the payments under affiliation orders for illegitimate children into line with those made for legitimate children.
It is also an essentially Christian Measure, and I would suggest to the House that, as children legitimate or illegitimate are believed to be equal in the sight of God, so also ought they to be equal in the sight of those who make affiliation orders. It could be argued,


though I think unconvincingly, that if this Bill were passed into law it would encourage immorality on the grounds that children born out of wedlock will be equally well looked after as those born to married couples. I submit to the House, however, that whatever our views may be on sexual morality on the part of parents, we ought never to visit those views on the offspring of such people and that we shall never stop downward moral trends by discriminating between children.
In the homes to which I have referred we have orphans born in wedlock and children born out of wedlock living side by side, with 30s. for the one and 20s. for the other. It cannot be justified in these days, when every penny counts and has to be watched, for children to be worth different amounts in such places, since they cost the same to clothe, house and feed.
In conclusion, I hope the House will give this small Bill a Second Reading and that the Government, which seems to be in a friendly mood this morning, will say that at any rate it backs it.

1.3 p.m.

Mr. Ede: Since more Private Members' Bills are killed on Fridays by people who try to extol their merits and take an undue time in doing so, and because I am anxious to see this Bill passed, my remarks will be short.
This is a good Bill. It remedies an anomaly, in the law as we now recognise it, and I am quite certain that it will assist benches of magistrates throughout the country who have to make affiliation orders in doing what they cannot now do, but what they often think they ought to be able to do. I hope that the Bill will have a speedy passage through Committee and that it will reach the Statute Book at an early date.
There is only one thing I want to add to the speech of my hon. Friend the Member for Lincoln (Mr. de Freitas), who quoted a terrible Section from an Act of Elizabeth I. It is anomalous that such words should have been used about illegitimacy in that reign because probably rather more than half the subjects of Her Majesty Queen Elizabeth I considered that she was illegitimate. Therefore, it is all the more remarkable that probably a very Protestant Parliament thought it necessary to use such terrifying—

Lieut.-Colonel Lipton: It was probably a Conservative Parliament, too.

Mr. Ede: No, I would not say that. The Elizabethans were comparatively good Parliamentarians and they knew how to stand up to that very regal lady on occasion in a way that was highly commendable. The only mistake they ever made was in going to her and suggesting that she should get married, a subject which she regarded as a matter of her own private concern.
I hope that this Bill will have a speedy passage into law, and I commend its merits to my hon. Friends on this side of the House and trust that they will support it.

1.6 p.m.

Mr. Cledwyn Hughes: I join with my hon. Friends and with hon. Gentlemen opposite in welcoming this Bill most warmly, and I consider that the House should be very grateful to the hon. Member who introduced it. As it stands, the law makes a cruel distinction between those children who are born in wedlock and those who are called illegitimate. Incidentally that is a most invidious term which should be abolished.
The law of this country, both in spirit and in its application for centuries, has seen to it that the sins of the parents shall be visited upon the children. The preamble to the Poor Law of 1676, which my hon. Friend quoted, shows the spirit in which this problem was tackled by our predecessors. The law has at all times placed a moral blame upon the child as well as upon the parents.
My only regret today is that this Bill does not form part of a more comprehensive measure of reform. We have had piecemeal Measures since 1872. The editor of Lushington's Law of Affiliation and Bastardy describes the law on this subject as a "disgusting patchwork" and, since the Bastardy Laws and Maintenance Act, 1872, we have had a number of small Acts which have done nothing to change the fundamentally wrong attitude adopted towards this important subject. It is the duty of the Government to introduce a new and more comprehensive Measure at an early stage imbued with a new and a more Christian spirit. Even today, unfortunately, there are sections of society which look askance at the illegitimate child, and it is the clear


duty of Parliament to give a lead in this matter and to wipe the slate clean of all the old Acts which reek of prejudice and discrimination.
There is a desire abroad to change things, and this is illustrated by a leading article which appeared in the "Manchester Guardian" of 1st February which summarised the present unsatisfactory state of affairs in this fashion:
English law remains cruelly punitive towards a group of children who deserve no punishment—those who are described as illegitimate.
I would also join my hon. Friend in commending to the House the report of the Joint Committee of the British Medical Association and the Magistrates' Association on the law in relation to the illegitimate child. It is a splendid report and makes a number of important recommendations of which I hope the Government will take notice. This Bill is an urgently needed first instalment, and I hope that it will make rapid progress through all its stages.

1.10 p.m.

Mr. Julius Silverman: In extending a welcome to the Bill, I think it is certainly overdue; and as has already been said, it goes some way to correct an anomaly: that is, of bringing payment which is made in the case of an illegitimate child into line with that for a legitimate child. At the same time, the circumstances of the illegitimate child and its mother—and, for that matter, its father also—are not in quite the same financial relationship as in the case of the legitimate child.
As my hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton) pointed out, the provision for an illegitimate child used to be greater than that for a legitimate child. It was at one time £1, whereas the payment for a legitimate child was 10s. That was not entirely an anomaly. A case was to be made that the mother of a legitimate child would usually be provided for, whereas the mother of the illegitimate child was in many cases unable to work, certainly during the early infancy of the child, and would have no other means whatever of support. It may well be that there is a case for a payment in excess of 30s., and this is an aspect to which consideration may be directed.
On the other hand, it should always be borne in mind that the payment which the putative father has to make in these cases is not a penal payment. It is simply intended to be a fair contribution, according to his means, to the support of the child.
I am not happy about the provisions of Clause 2, which provides that the putative father should continue to pay for the child after the age of 16 if the child is being further educated. The position of the father is quite distinct from that of the father of a legitimate child. He has no right of access. Usually, he is deprived of any interest in the child whatever, and it does not seem entirely fair to place him in the same position as the father of a legitimate child and to compel him to continue payment after the child has reached the age of 16.
Moreover, the Clause is retrospective in effect. Whilst I am not condemning all retrospective legislation as such, frankly this is one of the more objectionable forms of it. Under the Clause, it is possible to revive against a man a liability which, apparently, has ceased. I hope that consideration will be given to this aspect during the Committee stage in order that the Bill may be completely fair.
On the whole, this is a very useful Bill. It will do a great deal to help the unfortunate women who are unable to support their children from the payments which are now being made. I hope that the Government will do what they can to find time to expedite the Bill's passage into law.

1.13 p.m.

The Joint Under-Secretary of State for the Home Department (Sir Hugh Lucas-Tooth): I am sure that the whole House will wish to congratulate the hon. Member for Dorset, North (Mr. Crouch) and the others who have been responsible for the introduction of the Bill. During the debate, nothing has been said which is not favourable to its general purpose. Like the right hon. Member for South Shields (Mr. Ede), I shall make my remarks short, because I have no wish to delay the Second Reading of the Bill.
I can say right away that the Government welcome the Bill and that we will


do what we can to assist in improving it, so far as that is possible, in Committee and getting it on to the Statute Book.
There are two principal provisions of the Bill. The first deals with increasing the amount of maintenance for illegitimate children. It is interesting to see that whereas in 1872 the maximum amount was 5s. and in 1918 it was 10s., it became 20s. in 1923 and now, by the Bill, it is proposed to be 30s. I have not consulted the Treasury to see whether this increase runs only pari passu with the alteration in the value of money, but on the whole, I think, it shows some absolute increase. The amount which is now proposed will produce equality as between the illegitimate and the legitimate child.
The second main provision of the Bill is as regards the period of maintenance during which the father can be ordered to provide for the child. Here again, the extension from the age of 16 to the age of 21 is in consonance with present day general views. It covers the period when the child may be receiving the higher kind of education, to which a quite considerable number of illegitimate children can look forward.
Most of the points which have been made during the debate can properly receive attention when the Bill is dealt within Committee, but perhaps I may answer a point made by the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton), who referred to the report of the British Medical Association Committee and pointed out, quite correctly, that there are other recommendations in that report which are not dealt with by the Bill. The hon. and gallant Member suggested that they might be referred to the Royal Commission which is now sitting.
Those recommendations go probably a good deal wide of the terms of reference of the Royal Commission, but I promise the hon. and gallant Member that I will draw the matter to the attention of my right hon. and learned Friend.

Lieut.-Colonel Lipton: And, if I may suggest it, the Attorney-General also.

Sir H. Lucas-Tooth: Yes.
The hon. Member for Anglesey (Mr. C. Hughes) referred to the law of

bastardy as, I think. "a disgusting patchwork" and suggested that the Government might look at the matter with a view to introducing a consolidation Bill. That also has been noted, and I will undertake to draw the matter to the attention of my right hon. and learned Friend. I am not certain that the hon. Member may not have gone further than that. If he did, it would, of course, involve a much larger measure of legislation, about which there might be difficulties.
I can do no more than say that this is a good Bill, that the Government will do what they can to facilitate its passage and that I hope the House will give it a unanimous Second Reading.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Standing Committee.

Orders of the Day — COMPANIES BILL

Order for Second Reading read.

1.20 p.m.

Sir John Barlow: I beg to move, "That the Bill be now read a Second time."
It is customary, and a very good custom, for hon. Members to declare any interest they may have in any topic about which they speak. I am a director of several companies, but I do not for a moment think that if this Bill were passed, providing for the issue of shares of no par value, it would in any way interest me or my companies. From that point of view, I believe myself to be entirely disinterested. Unfortunately, since this is a rather technical Bill, I do not have the advantage of being either a lawyer or an accountant. Perhaps that might work both ways, and while a lawyer or accountant would have great technical knowledge on this subject, he might not have the working experience which normally a company director has in his day-to-day business.
The purpose of this Bill is to permit the issue of shares of no par value and permits the conversion of existing stocks and shares into shares of no par value. I emphasise that it is not obligatory to do so in any way. It is purely a permissive Bill for those who wish, for various reasons, to do so. If no one


wishes to take advantage of this, no one will have to do so.
This has been a somewhat difficult Bill to draft. It would have been preferable if it could have been included in the Companies Act, 1948, which is a consolidating Act. For that reason, it is impossible to re-write that Measure at the present time. I believe such company Measures are re-written every 20 or 30 years. At the time the Companies Act was passed, there was no evidence of any demand for this provision. This Bill is almost an amending Bill in respect of certain parts of the existing Companies Act, or perhaps it could be better described as a Bill grafting on a new idea to permit the issue of shares of no par value.
For that reason it has been a very difficult Bill to draft. I feel the House will agree that in the circumstances it has been very skilfully and well drawn. Owing to the difficulty of drawing it, I do not pretend for a moment that it is perfect in its present state. There are many things which could be changed and improved, but I am anxious to lay this principle before the House, because I am convinced that it would be an improvement in company law and, that there is a demand for it.
Hon. Members will recollect that much of the Companies Act, 1948, was based on the Report of the Committee presided over by Mr. Justice Cohen at that time. I quote very briefly from what that Report says on this subject:
The advocates of shares of no par value recognise that if their issue were permitted, numerous safeguards would be necessary to prevent abuse, for example, provisions as to the price at which the shares might be issued and as to the extent to which the money received by the company in payment for the shares might be treated as a distributable surplus, not as capital, and used accordingly.
I am fully aware that there might be abuses, and for that reason I think hon. Members will agree that this Bill has been drawn very narrowly. Perhaps in the opinion of some it is not sufficiently wide, but that was done for a very definite purpose. I quote again from the conclusions which the Committee drew in their Report:
While there is, in our view, much logic in the arguments put forward in favour of shares of no par value, there is little public demand for, and considerable opposition to, the proposal.

They further concluded:
We therefore refrain from recommending any change in this matter.

Mr. Glenvil Hall: Before the hon. Baronet leaves that paragraph in the Report, I wonder whether he would also call attention—which will save the rest of us doing so—to the objections which the Cohen Committee also saw to the suggestion? I am thinking particularly of their reference to the fact that it would open the door to large manipulation of a wrong kind.

Sir J. Barlow: Yes, I quite agree that that is there and I thought that was my first quotation. I want to be thoroughly fair in the parts which I quote and do not quote from this Report.
At that time, as will be seen, there was very little demand for this change. It will be remembered that the Committee sat during the war for about two years and issued their Report in June, 1945. During that period many people were otherwise engaged with more important matters than company law and investments. Conditions undoubtedly have changed. Since that time there has been considerable support for this idea. There has been experience of it in the United States of America and in Canada for many years. I am informed that probably half of the large industrial companies in the United States have shares of no par value. I suggest that if they have been able to prevent abuses in a reasonable way, by basing legislation on their experience, it should not be impossible for us to do the same thing here.
Since I have put forward this Bill, I have been astonished at the amount of support coming from every part of the community. Many small shareholders—I imagine they are small shareholders—have written in their private capacity from different parts of the country. They have included a professor of economics of the University of London, and there have been letters from many important bodies in the City of London. Some people who previously were against the idea, or had no distinct opinion about shares of no par value, now say that, owing to the changed circumstances, they are very much in favour of it. I emphasise that I am putting forward the principle and I should be just as anxious as anyone to stop up loopholes and prevent abuse.
I think that one of the reasons for the change in the attitude of so many people to these matters is that companies are gradually getting older. They are more mature and have built up reserves and ploughed back profits in the past. It is now rather anomalous that a company which has been in existence for perhaps 50 years should be paying a dividend in inflated value on an original capital, issued perhaps 50 years ago. We get two entirely different sets of values.
As the House knows, the present company law demands that when shares are issued they shall have a nominal value, that is, the value at the time of issue, printed on the certificates. It is frequently a pound, or it may be 10s., half a crown or two shillings. It may be anything, but it has to have the value printed on each certificate. I suggest that some shares are worth their face value at the time of issue, though many are not, and that after the time of issue it is a matter of coincidence if they are ever equal to that actual amount again. They will probably ever after have a value more or less fluctuating but never identical to the figure written on the certificate.
That creates much confusion in the minds of the less experienced investors. Many people suppose that because £1 or 10s. is written on their certificates, the real value of the shares has some relation to that figure, whereas we all know that there is frequently no relation whatever. It would be much easier for the small inexperienced shareholders to realise what they are doing if shares were of no par value.
I will give two examples. A few months ago the General Electric Company issued £1 shares at 55s., and I think they pay 15 per cent. dividend. That would be a yield of about £5 9s. per cent. It is not easy for an inexperienced man quickly to estimate what the yield is on the price of the shares either at issue or at their subsequent value.
It is perhaps even more difficult in the case of a share of 12s. 6d. nominal value standing at, say, 48s. 6d. with a dividend of 37½ per cent. It is very difficult for an inexperienced man to see easily and quickly what the yield is on the present market value of the shares. When the dividend is always related to the original nominal value of the shares, it lacks reality for the ordinary small investor.
Shares of no par value do not have a dividend expressed in terms of a percentage; they have a dividend expressed as a cash value, and in the second instance which I have mentioned the dividend, instead of being expressed as one of 37½ per cent., would be about 4s. 8d. per share. It is very much easier and simpler for small inexperienced investors, of whom there are millions in this country, to see and understand exactly what they were doing.
It has been suggested that this is a method for hiding the distribution of large dividends. Let us consider the case of a long-established company which in process of time has laid aside and ploughed in profits. It may have a working capital of five or 10 times the value of the original capital, and it is ridiculous to pay a dividend on the old original capital when there is a much larger amount really being used in the business. That also is difficult for inexperienced people to understand.
I want to expose the truth in every way and not to hide it. I want people to see how much the company is earning. I want them to see exactly what kind of value they are getting on the present market value of the shares. This Bill would simplify matters very much indeed. A share is the value of the assets it represents combined with its regular earning capacity, and shares of no par value are designed to show more accurately and easily the value they represent than does the present outmoded system.
I have tried to put the gist of the matter briefly, but I emphasise that people and organisations who had no real interest in this matter when the Cohen Committee sat nearly 10 years ago now have a very real interest. The House will have seen the almost universal support which this idea has received in all sections of the Press. Some people wish to see the Bill improved, as I do myself. I wish to see it strengthened to provide against any abuse, but I am most anxious that it should receive a Second Reading.
If the House does not give it that opportunity today, it will probably be another 20 or 30 years before there is another Companies Bill which will be the appropriate occasion for this proposal to be brought forward again. I very much hope that this Bill, which is urgently required in the City, and which


would benefit the small investor, will receive a Second Reading today.

1.37 p.m.

Mr. John Arbuthnot: I beg to second the Motion.
I think the whole House will agree that the Bill has been moved by my hon. Friend the Member of Middleton and Prestwich (Sir J. Barlow) in a thoroughly fair and dispassionate manner. Those of us who are supporting the Bill in the House think it is of great importance that consideration should be given to the pros and cons, and we do not wish in any way to gloss over the difficulties that the Bill might be thought to provide. We do feel, however, that the situation is such that people can be misled by the way that dividends are paid and by the way in which shares are sometimes quoted at their par value when they are not worth anything like it.
As time is comparatively short this afternoon, and as there are a number of other Members who wish to speak, I do not propose to talk for very long, in the hope that the Minister will rise to tell us the Government view about the Bill. It is a Bill which I should have thought ought to have commanded the support of Members on all sides of the House. I well know that there have been occasions when the principle of par has caused acute embarrassment to Members on the other side of the House. For example, the right hon. Member for Bishop Auckland (Mr. Dalton) might even today have a song in his heart if there was not occasionally quoted to him the par value of Dalton bonds.
This Bill however is not concerned with them, it is very much narrower in scope. It deals with the par value of shares in ordinary companies, and the object of the Bill is solely to prevent people from being misled. What is the way in which people are liable to be misled today? It seems to me that there are two things which are misleading. The first is caused by the depreciation in the value of money. If a company had been formed in 1914 its assets, if it had retained them intact, would be very much greater in terms of the present day £ than they were in terms of the £ in 1914.
I have been trying to obtain an accurate figure of the value of the £ today as compared with 1914. The most accurate figure I can get is that the £ today

is worth 5s. 9d. in relation to the £ in 1914. That is to say, the £ has depreciated in value since 1914 to very nearly a quarter.
I must admit that that figure is not particularly accurate, because the only basis on which I have been able to get it has been on the basis of consumer goods and not capital goods. But none-the-less the argument still applies. The £ today is worth, roughly, 5s. 9d. compared with its value in 1914. So if a company was founded in 1914 and kept its assets intact, the capital value of that company, the par share value of that company, ought to be very nearly £4 for every single £ share which it has. If this Bill is read a Second time it will take us a stage further towards removing the possibility of people being misled in that way.
The other way in which I believe people are being misled today is when someone says, "Here is a £1 share in such-and-such a company. You can have it for 13s. 6d." Anyone who is not initiated in these things may think, "By jove, this must be a good bargain." But the possibility is that if it is offered at 13s. 6d., not only is it not a reasonable bargain, but it is very often a bad one. The converse also applies.
It does not follow that, because a £1 share is valued on the market at £5, people are paying through the nose for it. It is to remove that type of misrepresentation that we are supporting this Bill today. Both the United States and Canada have had the no par share for a considerable time, and the misgivings which some people may feel about the introduction of the no par share into this country have been dispelled by the experience of those two countries. If they can get a no par share value without suffering any adverse effect on their people, why should we not do the same?
My hon. Friend referred to the Report of the Cohen Committee, and he was questioned about it by the right hon. Member for Colne Valley (Mr. Glenvil Hall). The right hon. Member said that the Cohen Committee suggested that manipulation of an undesirable kind was likely to take place if the no par share was introduced.

Mr. Glenvil Hall: It might take place.

Mr. Arbuthnot: When the Cohen Committee was sitting it did not have the advantage of this Bill, and it did not see how tightly this Bill was drawn. It was because he specifically realised the danger to which the Cohen Committee referred that my hon. Friend has drawn his Bill as tightly as he possibly could. As he said, there has not been time to perfect this Bill. We realise its imperfections and limitations and that there is considerable room for improvement. But we believe that the principle of the Bill is right. For that reason, we hope it will get a Second Reading and will be available for improvement on Committee stage.
After all, a share in a company is not related, or is related only for a comparatively short time, to the so-called par value. A share in a company means what it says—a share—and to add anything else to that and say "This is a share valued at £1," is a misleading irrelevance. The longer a company is in being and the longer it is working, either efficiently or inefficiently, the greater becomes the disparity between the par value and the real value of the share.
I believe that the public will be able to understand more easily where they stand in these complicated matters if they know they have a share in a company and that the company is divided into so many shares. They would know what proportion of the assets of the company belonged to them. But to say that the value of a share is £1 when one knows perfectly well that though that may be so today it will not be so tomorrow, or this time next year, seems to be misleading and to require the remedy which this House can provide.

1.47 p.m.

Mr. Norman Smith: I beg to move, to leave out "now," and at the end of the Question to add: "upon this day six months."
This Motion is, of course, tantamount to the rejection of the Measure. The hon. Member for Dover (Mr. Arbuthnot) wanted us to believe that it is possible in this year 1952 for somebody or other in this country to be deceived by a plausible rogue flourishing a beautifully engraved share certificate and saying, "Look here, my dear, here is something which is a £1 share, it says so on the face of it. You can have it for 13s. 6d."
It is all very entertaining, but I just do not believe that such a person exists anywhere in the length and breadth of this country. In novels, yes; in real life, no. One cannot sell share certificates that way, and I think that the hon. Member for Dover drew rather heavily upon his imagination.
While the hon. Member for Middleton and Prestwich (Sir J. Barlow) was moving the Motion, I was reminded of those dear days beyond recall in the 1890's when I was a boy, when there used to be current in English conversation a phrase, "Yankee notions." Those were the days when America was far away in space and time, three thousand miles and seven days; and "Yankee notions" was the phrase commonly applied to such imports from the United States as were held generally in rather low esteem on this side of the Atlantic. In that category I would make so bold as to include this Bill, the rejection of which I have the pleasure and the duty to move.
What would it all add up to, supposing the Bill were passed? It would mean in the case of a company which had taken advantage of this Bill and had converted its ordinary stock, or ordinary shareholding, into shares of no par value, that the directors would have power much more easily than is at present the case, to divide up those shares into a greater number of units. That would be the first innocent-looking consequence.
The second consequence would be that the investing people, instead of receiving a dividend warrant referring to a dividend declared and announced at so much per cent.—shall we say, 4½ per cent., or whatever it might be—would find, as I believe the hon. Member said, that their dividend would be announced as a sum of money per share.

Mr. Arbuthnot: Does the hon. Gentleman realise that it is perfectly possible to pay dividends in shillings and pence at the present time, so that this Bill does not affect that situation?

Mr. Smith: It is. I know of at least one company that does that; the Gloucester Carriage and Wagon Company pays 4½d. on a 10s. share. I know that. It would become general if companies were to convert their shares to shares of no par value. I get a certain amount of


pleasure from seeing these dividend warrants of "one dollar thirty cents per share" from Canada or the United States, even when Income Tax has been taken off on both sides of the Atlantic.
This is a most innocent-looking proposal, and really, as the hon. Baronet spoke, and more so as the hon. Member for Dover spoke, butter would not have melted in their mouths. Nobody would think that they were putting across the House of Commons something that was essentially, inherently and intrinsically anti-social and unethical. Let us look into this matter a little further, and let us see what the consequences are.
Let us imagine that we have a dividend declared in the ordinary way today. Owing to the fall in the value of money, the depreciation in the value of money—which has not been going on just for the last 50 years, but since the reign of the first Elizabeth and even longer than that —it is sometimes apt to happen (and I know this is what hon. Members opposite do not like) that dividends, when declared, look as if they are unduly generous to the shareholders and proprietors.
Let us imagine that such a dividend is declared at the rate of 40 per cent. If we had what this Bill wants to do, there would be no longer any declaration of dividend at the rate of 40 per cent. It would simply be a dividend at the rate, as the hon. Gentleman mentioned, of something like 4s. 8d. per share, or whatever the amount was. The essence of my case against this Bill is that the declaration and announcement of dividends quoting a rate per cent. does tell somebody something. Does the hon. Gentleman wish to interrupt.

Mr. Arbuthnot: Does the hon. Member realise that it is the easiest thing in the world to provide more shares so that one can reduce the apparent dividend, so that that position is not affected by this Bill either?

Mr. Smith: The hon. Gentleman's interruption is most helpful, and I was coming to that point. He says that we can multiply the number of shares so as to make the proprietors' shareholding look as if it were greater in order to minimise the value of the dividend when it is announced. I propose to come to

that point presently. There are a number of devices by which it can be done, such as watering the stock, bonus share and all the rest.
For the moment, however, I want to compare, favourably, as I think, to my point of view, what happens now when a 40 per cent. dividend is announced with what would happen if a dividend of 4s. 8d. per share were announced, in the event of this Bill becoming law. The hypothesis is that some company or other has announced a dividend at the rate of 40 per cent. Quite a number of people are, or ought to be, interested in that announcement, and I would divide those people into at least three categories, not all of them in the fortunate position of being proprietors of the company.
There are, in the first place, the investors, but the word "investor" covers a very widely variegated class of people. Because we say that Mr. A is an investor and Mr. B is an investor, it does not follow that Mr. A and Mr. B are people very much like each other. I would say that investors can be divided into two very unequal classes numerically.
There is the small but lively and active type of investor, who is very wide awake and who knows what is going on. He may be a little acquisitive and unduly prehensile, possibly, but he is intelligent and wide awake. He is very sensitive to what is going on in the world around him. We see him represented on the benches opposite in large numbers. I do not deny his ability; I merely question his social utility. As for this minority of investors, how do they react to the announcement of a 40 per cent. dividend? It is not really for me to say. Who am I, that I should presume to look inside intelligences far and away surpassing mine in this respect? But I suppose that some of the more lively intelligences among the active investors, seeing the announcement of that 40 per cent. dividend which this Bill seeks, in many cases, to suppress, will say "This enterprise, this business, may or may not offer lucrative opportunities to active practitioners of private enterprise. It seems to me worth while looking into this."
Now, let us consider the large majority of investors, the people who, I believe, were in the mind of the hon. Member for Dover when he made his speech.


They would react quite differently to the announcement of the 40 per cent. dividend, and this, I suppose, is really the case for the Bill. They would react something like this. "Forty per cent? It seems a lot. I think I will get some of these shares—£l shares, 40 per cent., very nice."
But, when these people went to buy the £1 shares, they would be told that the current price is £10, and they would think this most unreasonable. They would be asked £10 for the £1 share. I am assuming a very low level of intelligence—but that was the point in the mind of the hon. Member for Dover when he seconded the Motion for Second Reading. The hon. Gentleman cannot have it both ways, and he cannot blame me for under-rating the intelligence of investors.
I think that is how the ordinary unintelligent investor would react to the announcement of the 40 per cent. dividend. I want to put it to the House that it is quite useless, in assessing the merits or otherwise of this Bill, to have regard to the probable effect on the minds of investors, most of whom are either very pessimistic and suspicious people or very credulous and gullible, which is quite unlike the probable reactions of other people than the investor.
If it is a case of protecting the shareholders, we do not do it in this way. The best protection for shareholders is for them to deal with a reputable firm of stockbrokers. Goodness knows, there are enough of them. I had a brother, the late Herbert Smith, who was an eminent solicitor in the City of London, specialising in company, law, and he used to tell me that English company law compared very favourably with company law across the Atlantic, because it made things much harder for swindlers and much easier for the straightforward investor. My brother was not on my side, politically, but I think he was a good judge.
I say that we have to look at the effect of the announcement of a 40 per cent. dividend on other people than shareholders and investors, whether the minority of intelligent ones or the rump of unintelligent ones. I think there are two other parties to the transaction of the announcement of the 40 per cent.

dividend who have some claim to be considered. There are, first, the people who happen to be employees of the firm concerned. They see a dividend announcement at the rate of 40 per cent. on the nominal share capital, and that might or might not create an accurate picture in their minds. The point is that it does put a picture in front of them, a picture that needs explaining and which ought to be explained.
It could happen that a 40 per cent. dividend might be a completely reasonable dividend in all the circumstances. We all know that could happen. But the employee, when he sees that his firm has announced a dividend of that order, is surely entitled to have the explanation. If they had their way and this Bill were passed, there would be no picture at all in front of the employee's mind. Four and sixpence a share would not tell him a thing.
I do not deny that a 40 per cent. dividend might tell him the wrong thing. This is not the street corner, but the House of Commons. We are reasonable men getting together. The point is, let the announcement of the dividend put some picture in front of the mind of the employees, and then let them argue about it afterwards.
There is another set of people who, I think, have even more claim to be heard than the employees, considerable though their claim actually is. The third set of people who, I think, are legitimately parties to this transaction are a very numerous class without whom any economic process could have no meaning at all and in whose absence there would be no business whatsoever. I refer to customers or consumers, who very rarely enter into the picture where economic argument and discussion are concerned. The customer of the firm, noticing that it has declared a dividend expressed at the rate of 40 per cent.—this is our hypothesis—would be inclined to say to himself, "This firm is overcharging me rather considerably for the things I buy from it."
The customer gets a picture in his mind, and I have one very acute recollection of such a customer who reacted to the price of British steel in 1935, and whose name was Lord Nuffield. His reaction to the declaration of the dividend


of a certain concern, taken in conjunction with the price he had paid for its products, was, "I only wish I were a younger man; I would set up in business against them." The consumer is entitled to be heard in these things, and the gravamen of my case against the hon. Baronet's Bill is that it would take away any picture whatsoever—I know what he is shaking his head about, and I will deal with that in a moment—whereas the present system, imperfect though it may be, gives a picture.
I know that the hon. Baronet would say that the case of the people who gave evidence in favour of the no par value shares before the Cohen Committee was, "If you want to know about the capital value, whether you are a customer, an investor or even a trade union official, all you have to do is to study the balance sheet which the wise company law of England compels firms to produce." I suspect that was behind the shaking of the hon. Baronet's head.
But, I put it to the House, what really is the use of saying that balance sheets afford the protection which ought to be given to the three parties concerned, the investor, the customers and the employees? Is there any hon. Member in this House at the moment who could really put his hand on his heart and say, "I can look at a balance sheet and understand it just as easily as I can read the Anglican Prayer Book and understand that"? It just does not make sense. I am not going to pretend that I am always edified by a balance sheet. I am more often mystified. Why should anybody be ashamed of that? Hon. Members on both sides of the House are mostly the same. Some are more edified than others. I remember—

Mr. R. Jennings: The hon. Gentleman is suggesting that the customers and the ordinary shareholders should take a balance sheet and analyse it in order to find out the true value of a share, and in the same breath he is saying that these people do not understand the breaking down of a balance sheet. If that is so, how on earth are people going to find out the true value of the share? Surely, the hon. Gentleman is defeating his own argument.

Mr. Smith: I entirely agree with the hon. Gentleman. I am saying that the

balance sheet argument is no answer for the hon. Baronet to use against me when I say his no par value shares would take away any picture whatsoever. The hon. Baronet shakes his head, but the only thing he can have inside his head is the conception of the balance sheet.
Let us have a word on this balance-sheet point and dispose of it for good and all. About the time of the General Strike, I became interested in finance. I could see there was some catch in this class war business. Among other things I read a few years later was an autobiography of a gentleman named Leaf who had for many years been chairman of the Westminster Bank. Well, he was somebody, and he recorded a conversation he had had with the then Governor of the Bank of England, Mr. Montagu Norman as he then was. He said to Mr. Norman, "You know, many people would not understand the weekly statement which you put out from your bank." According to Leaf, Norman replied with a twinkle in his eye, "I doubt whether even you would always understand it."
If people like the late Walter Leaf cannot read a simple balance sheet like that purporting to come week by week from the Bank of England, people less important may be forgiven if they do not accept the argument of the hon. Baronet that the balance sheet is a remedy for anybody who wants a picture, a picture which his Bill is taking away.

Sir J. Barlow: Even if the Bill takes away that picture, it puts a clearer and a better picture in its place.

Mr. Smith: I submit that the picture which is superimposed goes against the principle of this thing, also that in effect it does not work. My case is that the promoters of this Bill are seeking to conceal from people entitled to know some of the goings-on, some of the operations of the firms concerned. My argument, to the extent that it goes that far, was strangely enough confirmed one day this week by no less respectable a person than the City Editor of "The Times" from whom, with permission, I will quote. It is rather a long quotation, but it will not take a moment. I submit it is very relevant to the whole of this argument and it helps the case of the hon. Baronet; it makes the case of the promoters of this Bill. It says:


The most potent argument in their favour really belongs to the sphere of protection against misleading propaganda and misrepresentation, and this could hardly be considered proper fare for the Cohen Committee or any other committee on company law. Par values have virtually lost all real meaning. They lend themselves in some circumstances to dividends of vast nominal percentages which bear no relation to the real dividend on either employed or subscribed capital; and this puts a savage weapon into the hands of any anti-capital propagandist—or even any anti-capital legislator—unscrupulous enough to use it. There would certainly be nothing undignified or deceitful in removing such a weapon or removing the artificiality which provides it. The introduction of the N.P.V. share would be a complete answer.
I do not impute indignity or deceit to the hon. Baronet or his friends. What I do impute to them is a narrow-mindedness which in the circumstances of the case really is unpardonable. They are concerned only with the point of view of companies and not with other points of view. They have a quite unqualified belief in what they call private enterprise. For them the law of supply and demand is just as much a law as Boyle's law or Avogadro's law or Charles's law, or any other physical law we learned at school. We on this side of the House believe that private enterprise needs a good deal of restraint. And it has long been my belief that the law of supply and demand is based on the ethics of the jungle, so that wise statesmanship should consist primarily in organising economic abundance so as to render that law nugatory.
If this Bill is passed, it will have the effect of drawing a very decent veil of legal, respectable, obscurity over the operations of companies. I want to quote at this stage from the Report of the Cohen Committee on Company Law Amendment which investigated this question eight or nine years ago. The people who held that investigation were, of course, perfectly well aware of what goes on in companies. They knew all about bonus shares, about watered capital and various other devices, but this is what the Committee said apropos no par value shares:
We have also had some evidence that in practice this class of share has given an opportunity to the unscrupulous to manipulate accounts which could be defeated only by a series of elaborate provisions, the substantial effect of which would be to re-introduce a capital account and, with it, most of those same complications which the no par value share was designed to avoid.

This Bill would take out the £ sign from the nominal capital of the company, but that £ sign would somehow or other find its way back to the balance sheet where the capital account is concerned. Let the hon. Baronet the Member for Middleton and Prestwich look at the experience of Canada. It is very significant indeed that in Clause 6 of his Bill he provides that where a company does what this Bill would enable the company to do, the authorised share capital of the company should consist of the total nominal amount so converted plus any share premiums—in other words, the total consideration received from the holders of the shares.
That tells me a great deal, because that was the provision in the original Canadian legislation of, I believe, 1924. Six years later the Canadian law was modified to give complete discretion to the directors in deciding what to do with the consideration they got from these owners of the shares—complete discretion to allocate either to capital or to surplus. The result of that was to open the door to fraud, so that four years later Canadian law had to be amended again, allowing directors discretion as to one-quarter and compelling three-quarters to be allocated to capital; the remaining one-quarter, I suppose, could be used to write off capital losses or even to pay out dividends.
The promoters of this Bill cannot claim that the experience of Canada in that respect has been a happy one, which I expect is the real reason why they have made this provision in Clause 6. It is well known, as the hon. Member for Dover intimated, that one can split up shares to make capital look more than the amount of capital subscribed by the promoters, through devices well known to us all. But there is a limit to that process, and it is because of this limit that this Bill is put forward. That limit is a pure and simple arithmetical limit.

Sir J. Barlow: Before the hon. Member leaves criticism of Clause 6, he will see that in lines 29 and 30 provision is made against the abuse he suggests, because it is linked up with subsection (2) of Section 56 of the principal Act of 1948.

Mr. Smith: That provision had to be made because experience in Canada between 1930 and 1934 revealed that this no par value device can open the door to


fraud. There is a limit to the splitting and dividing of share capital under the law as it stands. The limit is imposed by what is possibly the most elementary consideration of mathematics. Under the law as it is, any company that decides to split its share capital nine times—supposing the nominal value is 10s. a share —gets down to 1s a share. There is an objection to a share of nominal value of 1s.—it sounds so insignificant. If I may use a homely illustration, it is rather like the Yorkshire Penny Bank. I have no doubt that that bank is a very solid institution of considerable importance to the economic life of the North of England, but whenever I pass one of its branches, those massive, grey, stone-built erections, I always itch to walk inside and plank a penny down on the counter. The name of the bank is not consonant with prestige.
Under the existing law, which this Bill would terminate, if one splits ten shilling shares nine times, one ends up with a 1s. share. That is insignificant and does not sound good. But under this Bill the difficulty is removed. One can split the 10s. share as much as one likes, and under the Bill a dividend of 10s. on a 10s. share would simply become a dividend of a Is a share. There being no denomination of share, everybody would be effectively deceived and that is the essence of my argument against this Bill. As the law stands, one can have a picture, as I have put it, consisting of the relation of declared dividend and Stock Exchange value to nominal value. That is a picture which may or may not be accurate, but which can be made the subject of discussion.
My last charge against the hon. Baronet the Member for Middleton and Prestwich and his hon. Friends is much more serious. It seems to me that this Bill has been drafted with an eye on what is possibly the most important characteristic of our age in all that appertains to company finance. I think it is demonstrable that there is less disposition on the part of investors to take risks and put up their money for risky enterprises than there has been for a very long time.
I believe that has nothing to do with politics but is mainly the outcome of technological developments which have been of such a character as to insist that the productive plant should be on a physically far greater scale than hereto-

fore in history. No handful of enterprising men meeting in the saloon bar of a public house could decide nowadays to put up £1,000 each to start a steel works. For technological reasons, a steel works is so big that somehow or other the financing has to be done in another way. It is of the essence of the era in which we live that large-scale industry has found a method of financing developments without calling upon people to put up risk capital. The hon. Baronet's Bill would have the effect of concealing the operation of this important economic factor.
I would not say that the promoters of the Bill are concerned with the interests of shareholders. I do not believe they are. We live in the epoch of the managerial revolution. I would say that this Bill is the outcome of the managerial revolution. It is designed to conceal the operations of industrial managers and financial manipulators who proceed in this way to get the capital which they want for expanding their industry. Undistributed profits become more and more important as the years go on. Undistributed profits under this Bill could quite easily be capitalised, because the hon. Baronet was careful to put in a proviso to Clause 7 which reads:
Provided that nothing in this section shall prevent the issue of common shares to members of a company in connection with the capitalization of its reserves.
I think it is pertinent to ask where these reserves come from, which this Bill would enable to be capitalised, without anybody knowing, in so easy a fashion. There is in my constituency a very large, well-known and important company which makes most efficiently consumer goods. I have discovered that the finances of that company are mysteriously typical of the finances of most other companies of like size and character inasmuch as this happens: for every 13d. of realised trading surplus, that company pays 7d. to the Exchequer, leaving the directors 6d. to play with. Of the 6d. the directors pay 1¾d. to the ordinary shareholders; 4¼d. is held as undistributed profits and spent on extending the physical plant of the company. That is the important thing—spent on extending the physical plant of the company.

Mr. R. Maudling: Was not the undistributed Profits Tax introduced


by the previous Government designed precisely to get companies to do that as much as possible?

Mr. Smith: Yes; but I think the hon. Member is omitting this. My hypothesis related to 13d. surplus available, and the surplus available is at the disposal of the directors. The 7d. goes into the Treasury anyway, and the directors have the rest of it to play with. They spend to a great extent on money which they have got, not from risk-taking investors but from consumers and customers—by over-charging consumers and customers, charging them too much for the retail goods, not in order to give a hefty distribution to the shareholders but in order to extend the physical plant. The physical plant of companies is being extended in this way at the expense of the consumers, who are overcharged and made to pay too much.

Mr. Jennings: Surely that is not correct, by and large? Companies have built up reserves over the years by putting back legitimate profits instead of taking them out of the company. These reserves which my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) wants to deal with in this way consists of money which has been left in the company to build up that company from small beginnings It is unfair to say that the customer has been overcharged.

Mr. Smith: The hon. Member for Hallam (Mr. Jennings) has certain qualities of plain speech and straight thinking which render his interventions in debate, to me at any rate, always most attractive. The difference between him and me, and between his side of the House and mine, is simply this: He regards it as legitimate that customers should be made to pay what the traffic will bear. He regards as quite legitimate the essential law of business, that the price of an article is what it will fetch. We think that is unethical and amoral. We think that the price of a thing should be related as closely as possible, other things being equal, to the cost of its production. The important point is that this Bill will make it possible to conceal this sort of thing from the public. That is what we object to.

Squadron Leader A. E. Cooper: I had no intention of intervening in this debate at all, but the hon. Gentle-

man's argument is the most complete nonsense that I have ever heard in this House since I have been a Member of Parliament. He cited the analogy of 13d. of which 7d. goes to the Exchequer, the balance being that which he says the customer is overcharged. If 6d. is the amount overcharged, equally the 7d. which goes to the Exchequer is overcharged by the same argument. If the 7d. does not go to the Exchequer, then where is the Exchequer to get the revenue in order to provide all the social services which hon. Members on both sides of the House demands?

Mr. Smith: We on this side of the House think it is right that some of the products of industry should be taken and used for social purposes. What we object to is that they should be used for the private purposes of those who are running the managerial revolution—the manipulators of industry.
Before I was interrupted, I was saying that the way in which industry is being financed is a most important consideration. I do not object to industry being financed by an overcharge on consumers, provided that the consumers proceed to own the industry. That happens in the Co-operative movement which finances its very considerable capital expansions mostly out of its trading surplus. After all, its members do own the business, whereas in the case of private industry all this expansion puts added power into the hands of the managerial and financial class, which I, as a Socialist, resent.

Squadron Leader Cooper: rose—

Mr. Smith: Let me put a few figures and then I will give way again.

Squadron Leader Cooper: I wish to say something on the point which the hon. Gentleman is now making.

Mr. Smith: I want to quote from the Economic Survey for 1941. The tables there given of the extent of undistributed profits show that in 1948 they amounted to £524 million; 1949, a little less, £487 million; 1950, £569 million; 1951, estimated, £780 million. This is the bare bones of the Capitalist system, and this Bill would help the capitalists to go on doing that without the public knowing what was happening. Now I will give way.

Squadron Leader Cooper: It is a little late, but I am obliged to the hon. Gentleman nevertheless. He has cited the case of the Co-operative societies, and said that the company was at least owned by the consumers. He went on to say that private enterprise was not owned by the consumers and was, therefore, a bad thing. I would point out that the trade unions have consistently opposed copartnership schemes in industry.

Mr. Smith: The hon. and gallant Member's interjection is quite irrelevant. This has nothing to do with co-partner-ship. Perhaps I can deal with that point in a moment.
I should like to put forward the sort of amendment of the Company Law which we on this side of the House would welcome, and I am not sure that we would not do a bargain with the hon. Baronet. He, too, has certain qualities which we on this side appreciate. He would keep any bargain he entered into. I give him credit for that. Could we not have a bargain something like this? If they want us to give them what we think is rather anti-social and somewhat unethical, but which might conceivably be held to have certain advantages, we might be prepared to do it in return for a consideration —

Mr. Hay: On a point of order. Is this blackmail in order?

Mr. Smith: We might do it for a consideration—using the word "consideration" in the sense in which it is current among business men.

Mr. Jennings: Blackmail!

Mr. Smith: The hon. Baronet's Bill would have the effect of enabling directors to capitalise large sums of money held by firms as undistributed profits, actually put up not by investors but by consumers and customers who had been overcharged. I wonder whether they would agree—because this is the company law of the 1960's, and not for the first time am I letting the House into a knowledge of the future and giving a preview of the decade to come—that for every £1 that a private company uses cut of undistributed profits actually to finance the real physical expansion of its plant, there should be created £1 worth of Government debentures, held by the

Treasury, so that the community could get, at any rate some return, on what customers had been overcharged?
If they would agree to an amendment of Company Law like that, we might possibly be prepared to consider doing a deal with them. Until that happens, we remain unalterably opposed to their Bill. We regard it as retrogressive and embodying one of the worst features of company law. I would remind the House of the words of de Tocqueville more than 100 years ago when he wrote of America:
I know of no country where the love of money has taken stronger hold in the affections of men.
I think that if he were to come to Great Britain today, he would say, "I see sinister signs on the Conservative benches that they want to introduce into this country some of the worst features of American Law."

2.32 p.m.

Mr. F. Beswick: I beg to second the Amendment.
I hope that this Amendment will result in the still-birth of the proposal put forward by the mover and seconder of the Bill. I listened very carefully to what hon. Members opposite had to say, and I thought that they put their case over very clearly and very reasonably, but I am bound to say that I cannot find in all they said one single social reason why this Bill should be given a Second Reading. I agree with them that it makes no difference to the actual facts of company structure at the moment—it makes no real and immediate difference—but it would enable, I think, the interested people to use this change to make a very substantial difference in the material results of industry.
The hon. Member who moved this Bill said that he had had letters from all parts of the community. I was reminded of a classical remark that was uttered in this House when we were debating the Finance Bill in the last Parliament. It was being argued from the then Government Benches that a certain Amendment was designed to help the shareholders and not the community, and the classic remark was made from the Conservative benches that the shareholders were the community. If hon. and right hon. Gentlemen opposite really believe that, then I can well imagine they are also assured that this proposal has


the support of all classes of their community; but it is, in my submission, a very narrow section of the community who would stand to benefit from this Bill.
The hon. Member said that he wanted to make it easier to see and to understand what is the real value of shares. I think that is quite a reasonable thing to require, and I have nothing against that, but, as I see it, what he also wants to do is to make it much more difficult to understand what was the individual shareholder's actual contribution in the first place. This is a Bill to disguise and camouflage the real contribution of the shareholder. He wants to expose the truth, but I am going on to argue that it is another truth which we should try to expose to all the interested parties of our industrial system.
This Bill is not the only way in which hon. Members opposite and their friends have in recent years attempted to disguise and camouflage the relation between what they take out of industry and what they put into industry. The agitation that there was against a tax on bonus shares was also an agitation in favour of a very effective means of disguising how much had been put into industry by the shareholders in the first place. Also in recent years there has been a practice growing up among companies, and in their reports, to try to relate profits and dividends to turnover. It is often given as a percentage of the price of an article produced by a firm. As I hope to argue, there is no necessary relation between the contribution made by the shareholder as such and the output or productivity of the company.
Why is it that these efforts are being made to camouflage the actual structure —what was put into it and what is taken out of it? The reason why these various people are endeavouring to produce this camouflage is because the shareholders are taking too much out of industry at the present time—taking too much out, or staking too big a claim of the value of industry.
I had some figures extracted of some of the reputable firms—and I make no complaint against the firms themselves, for whom I have a great regard because I think they are a very valuable part of our system—but here is company A, for example. Let us see what they have

been doing. I take the figures up to 1945. A person who invested £100 in company A in 1923 will have received up to 1945 £355 by way of dividends. They will also have received another £160 by way of tax-free bonuses, and although in 1945 they were getting a reasonable 15 per cent. interest, it was 15 per cent. on a 50 per cent. increased shareholding because there had been two additional distributions of capital bonus shares. I do not propose to weary the House with more quotations of that kind, but that is not, in my submission, an unusual or extraordinary case.

Mr. Jennings: Is the hon. Gentleman taking 50 per cent. on the capital issue, or is he doing what is the right thing to do, and that is to find out either the initial cost of these shares or the capital employed in the business, because they are too vitally different things?

Mr. Beswick: I know all about it. I am going to argue later on that the nominal value of the shares—

Mr. Jennings: The issue.

Mr. Beswick: Let me put it this way. I am going to argue that the real capital value of a company at any given time does not necessarily have any relevance at all to the initial subscribed amount.

Mr. Jennings: That is exactly what we want; the hon. Gentleman ought to come on to these benches.

Mr. Beswick: The difference between hon. Members opposite and my hon. Friends on this point is that hon. Members opposite are claiming on behalf of the original subscribers the entire value of the company at the present time. The increase in the value of the company does not necessarily belong to the initial shareholders. On the narrow point asked, the 50 per cent. in my illustration was the capital distributed on the original contribution.
A classic example of extravagant extraction of wealth from industry by shareholders is contained in the most interesting figures of a certain insurance company. I gave the figure to the House recently when we were discussing the Industrial and Provident Societies (No. 1) Bill. I have worked it out that if I had invested £200 in the company at its inception towards the end of last century the capital value of that sum today would he of the order of £1,300,000.

Mr. Jennings: Does the hon. Member say that a £200 holding now has a value of £1 million? Where is that company? I will buy some shares if there are any available.

Mr. Beswick: If the hon. Member wants to know the name of it, it was the Prudential Assurance Company which, according to the Select Committee which investigated the matter, had a paid-up capital of £5,839 at the inception of the company. If the hon. Member wishes to do some arithmetic, he is welcome to work out the present value of that capital on the basis which I used in respect of the £200.
I take these figures from the findings of the Select Committee; the initial paid-up share capital in that concern was £5,839, and in the year when its affairs were investigated by the Select Committee the company distributed £400,000 in dividends after paying tax.

Mr. Jennings: But the capital had increased.

Mr. Beswick: The real capital did increase and that is what I am complaining about. If the hon. Member will allow me to proceed with my speech I will come to that point later on. The illustration I have given exposes the situation, and it suggests to me that hon. Members opposite want to bring forward a Bill of this kind to try to draw a veil over these very unpleasant facts. If hon. Members opposite do not like my quoting from the Report of a Select Committee—

Mr. Frederick Gough: In regard to the case of the Prudential Assurance Company, I have not the facts with me, but I wonder whether the hon. Gentleman has taken into the figure which he has given the amassed life funds of that company, which, of course, belong to the policy-holders and not the shareholders.

Mr. Beswick: I am talking about what was taken out by the shareholders. I know that an entirely different sum was paid out to the policy holders.

Mr. Gough: This will go into HANSARD and it is apt to be misread. The hon. Member suggested that if somebody put £200 into the Prudential Assurance Company when it was started, the holding would now be worth over £1 million. If

the hon. Member will forgive my saying so, that is a complete misstatement. The figure which the hon. Member has mentioned represents the savings of poor people all over the country. Perhaps the hon. Member will also quote the Pearl Assurance Company.

Mr. Beswick: The hon. Member is under a complete misapprehension. My facts are absolutely accurate, and they can be verified by reference to the Beveridge Committee's Report. I know that the shareholders or their descendants were able to use capital which they had not themselves subscribed. I know that they were also able to use capital which had been contributed by other people. This does not alter the fact that they were getting these extravagant amounts of money and that all the money was coming from industry.
If hon. Members do not like my going to a Select Committee for my facts, I will go to a much more reliable source, last week's issue of the "Sunday Express." I notice that that newspaper, with which I normally disagree excepting on Commonwealth matters, and disagree very violently, had a leader on this point. It said that the shareholders in one engineering firm last year received no less a sum than 4,000 per cent. on their original capital. That type of thing is utterly and entirely wrong. It is a situation that we ought to face, and it is one which hon. Members opposite are trying to cover up.

Mr. Arbuthnot: I think it was a fact, which was not brought out in the newspaper, that that was before appropriations and before taxation.

Mr. Beswick: If the firm paid out 4,000 per cent.—[HON. MEMBERS: "No!"]. Perhaps I misread it. I understood that the shareholders received 4,000 per cent. on their original capital. If I am mistaken I retract that one example. It was a pretty big amount, and if the figure is unreliable it only confirms my original impression of that newspaper. I am sorry that I have to withdraw the one good mark that I was prepared to give it.

Mr. Ralph Assheton: Will the hon. Member tell us to which Select Committee he is referring? I should like to obtain a copy of it and read it.

Mr. Beswick: The original Select Committee was appointed in 1889. [Laughter.] Oh yes; because a thing goes far back it does not mean to say it is the less true.

Mr. Jennings: The hon. Member has been talking about recent profits.

Mr. Beswick: We have passed that. The hon. Member's right hon. Friend is on a different point. I was saying that the original Select Committee was appointed in 1889. Subsequently there was an inquiry by the Parmoor Committee, the date of which I have not got, but I shall be glad to give it to the right hon. Gentleman.

Mr. Assheton: The hon. Gentleman said just now that one could see from the Select Committee's Report that the shares of this company which had orignally been worth £200 were now worth over £1 million and that the figure was to be found in the report of the Select Committee. The dates he took were 1889 and 1945. If the Select Committee reported in 1889 it cannot have gone into that point.

Mr. Beswick: The right hon. Gentleman misunderstood what I said. In order to get my figure of £1,300,000, I merely took the present day market value of the shares and related them to the original shareholding. I also quoted a figure of £400,000 distributed in one year, and that figure was given by the Parmoor Committee. I then gave the original shareholding of £5,839, a figure which was given by the original Select Committee of 1889.

Mr. Assheton: In that case, the hon. Gentleman did not inform the House what additional capital had been subscribed between the year of the foundation of the company and the date which he took.

Mr. Beswick: I did not inform the House because, to the best of my knowledge—I am open to correction—no other capital has been subscribed from outside. I will give hon. Members opposite some more figures about which they can get alarmed. These were compiled by the Amalgamated Engineering Union and were related to the engineering industry. They stated in a most interesting paper about two years ago that in 1948 the total profit in the engineering industry

amounted to £455 million. This worked out—and it is a very interesting way of relating profits—to no less a sum than £3 per week for every man, woman and child employed in that industry. The industry made out of each worker no less a sum than £3 a week. That sort of thing is entirely wrong.

Squadron Leader Cooper: I am trying to understand the argument of the hon. Gentleman but am finding it rather difficult. I cannot see the relevance of the point which he is now seeking to make. Even supposing that £455 million were the profit, then at least £300 million of it was taken back into the Treasury by taxation.

Mr. Beswick: The reason why the hon. and gallant Member has difficulty in following my argument is that I am not being allowed to proceed with it. If he would be good enough to hear what I have to say I will show the relevance of the figures. What have we established so far? [HON. MEMBERS: "Nothing."] Yes—it is that the profits extracted from industry are very great indeed.
Let me admit that it is a good thing for industry to plough back money each year from the annual accounts. I am not arguing against that. The question which I put to hon. Gentlemen opposite is: To whom should that money so ploughed back belong? They claim that it should belong entirely and exclusively to the people who contributed the original shareholding. I hold that argument to be false. I do not believe that the shareholders as such ave a right or claim to the entire sums which are ploughed back each year into industry.
One of the things that surprises me and which causes a good deal of argument is the ability of the rentier class—I use the expression for want of a better word—to keep going. They come here each year and point to the amount of money which is taken from them by taxation, and they mention all kinds of difficulties, but simple people like myself and those who elect me know that the rentier contrives to live at a very reasonable standard of living. How is it done?

Mr. Jennings: You think it is.

Mr. Beswick: I not only think, but I know. I do not confine myself to a cave but I go about in the world, and I know


something about these matters. Not only do these rentiers have a reasonable standard of living, but their capital holdings in some way appreciate with the rising cost of living and the increases of commodity prices. Although my friends tell me that they cannot now save, it being impossible to save after Chancellors of the Exchequer have done their worst, whether Labour or Tory, the fact is that all these people are saving each year at a fair rate through the activities of industrial firms. Saving is being done for them.
My hon. Friend has referred to the amount put back into reserve to the credit of the shareholders. We are re-capitalising industry and giving it additional capital which is put to the credit of the original shareholders. My friends are finding saving made easy for them by the work of the companies concerned.

Squadron Leader Cooper: The argument of the hon. Gentleman is fallacious and is based upon the assumption that the individual who takes out a share remains the permanent owner of it. There is an institution called the Stock Exchange which exists for the transfer of shares from one owner to another. It would be interesting to find out how long one individual holds a particular share.

Mr. Beswick: There are publications recently which have tried to establish the same point. I know well enough that the owner of a £100 share may have had to pay £300 or £400 for it, but that often means he is paying more for it because its value has appreciated while he was holding on to another share. The total shareholding appreciates. The total shareholding of the country, the United Kingdom, tends to appreciate over the years. A reliable authority, the late Mr. Hargreaves Parkinson, gives the figure as 250 per cent. for the appreciation between the beginning of this century and the beginning of the last war. If the researches were carried up to the present moment I have no doubt he would find considerably more appreciation than 250 per cent.

Mr. Ronald Bell (Bucks, South): rose—

Mr. Beswick: The hon. Gentleman did not listen to what I said earlier on or I would give way to him. I am now saying that I am wholly in favour of

ploughing back into industry each year a part of the surplus amassed during the year's work. That is good, but the money should not be ploughed back as the exclusive property of the shareholder. There are other interests involved which can stake a better claim to the money. My hon. Friend has suggested that the portion ploughed back should be set aside to the credit of the nation at large. That was an eminently constructive suggestion.

Mr. Maudling: Would the hon. Gentleman also agree in exactly the same way that whatever he manages to save out of his Parliamentary salary should become the property of the nation?

Mr. Beswick: The argument is a little irrelevant, but I am prepared to answer it. If I earn a certain amount of money during the year by my labours I am entitled to invest it in any way I like and to maintain the ownership of it. My argument is that the money made by various companies is possibly made by the managing director, his colleagues and the workers, but certainly not by the absentee shareholders. I am in favour of giving the working director a fair return as an incentive, but it should be given by way of salary, commission, or similar payment for work done, rather than as an exaggerated dividend on money originally invested. I notice that one or two Members opposite appear to regard this favourably.
I have found that among many executives and managing directors there is often a great deal of reluctance to pay out each year large dividends to shareholders who have contributed absolutely nothing to the activities of a company during the year. The profits from those activities should be put back into the industry without incurring any further debt to the shareholder for the benefit of the workers employed by the company, or probably the property of the State.
My hon. Friend suggested that a proportion of this money should be ploughed back into industry but regarded as the property of the State. There is nothing violently revolutionary in that suggestion. It is certainly a more constructive proposal than a Profits Tax which just takes the money out of the industry completely.
There is one additional view in support of this proposal which I want to put


forward for the consideration of the House. Over a large field of industry today the results at the end of the year flow as much from decisions made by the Government as they do from decisions made by the directors around the board room table. I have a friend who is a shareholder in an aircraft manufacturing company. He received last year a substantial bonus share. He had made no big decisions and no constructive suggestions. He had not even been near the factory. It was possible to make that distribution of share bonus largely because of decisions made in the Cabinet to expand our aircraft manufacturing industry to fit in with the re-armament programme. If the expansion comes from State decisions and national policy requires that a given industrial firm should increase its activities, all the more should we claim that the nation as a whole should have a stake in the various industries.
Therefore, I have great pleasure in seconding this Amendment. I do so because I can see no social advantages flowing from this Bill, but I can see definite disadvantages. It would help the absentee owners of industry so to confuse the minds of employees and electors that it would retard that day when we can get the kind of constructive reforms to company law for which my hon. Friend has asked.

3.3 p.m.

Mr. R. Jennings: I listened with great interest to what was said by the mover and seconder of the Amendment and, without being disrespectful, I suggest that they have put across the Floor of the House this afternoon nothing but a tirade of Socialist policy which has nothing to do with this Bill.
I support this Bill but, if the Minister cannot accept it, I would support something of the same nature. I feel a great deal of annoyance when I see Socialist newspapers pointing out the profits of companies, as they have done for the last six years. For instance, they give great publicity to dividends of, say, 40 per cent., and tell the electors, particularly at election time, that the rich people are taking money out of the pockets of the workers. They do this to propagate Socialist policy and collect votes. In my opinion, that is completely dishonest propaganda. The

only way to find the correct relationship that a dividend bears in a company is to have regard to the capital employed in it.
The hon. Member for Nottingham, South (Mr. Norman Smith), who moved the Amendment, said that he was not able to analyse a balance sheet—and neither were masses of electors—and find out the amount of capital employed. That is exactly why something in the nature of the Bill is needed. It would put a stop, particularly at election time, to lying propaganda intended to create disharmony between workers and employers because of the workers feeling that large dividends had been taken out of a company without there being any attempt whatever to show to the electors the amount of capital employed in the company.
I have had many years of experience in analysing and drawing up balance sheets. I have seen a company start from small beginnings, with, perhaps, £1,000 of capital. I have seen a family working hard in the business, taking out only very small sums in order to build up the business, and ploughing back, as it is commonly termed, the profits of their earnings, until the capital employed in the company bore no relation whatever to the original figure of £1,000.
Sometimes, over a period of 20, 30, or even 40 years, I have seen a business grow from, perhaps, £1,000 or £5,000 to a figure of £100,000, simply because those in the company have carried it on in a conservative way; they have not used up their resources, but have ploughed them back and have been able to buy more machinery and to employ a greater number of employees. If that is not a good thing for the country—and we do not all agree that it is not—then economically we can given up the ghost, if we develop that spirit.
The country has been built on that type of economic prosperity. There are thousands of companies—hundreds, at any rate, of which I know—where the issued capital bears no relation to the amount of capital employed, such as stock, plant and machinery, book debts, and so on. When a dividend is declared, there should be some means of allowing the public or the newspapers, or Members on the other side of the House, to ascertain exactly what is a correct figure


of dividend on the capital employed in the company, so that the truth can be readily seen instead of, as in the last few years, complete misrepresentation being made of the dividend percentages, to which the hon. Member for Uxbridge (Mr. Beswick) referred.
The hon. Member quoted the Prudential Assurance Company. Everybody knows that that Company started from very small beginnings and is now a vast concern. It has had further capital. It has had the people's pennies and two-pences a week in the shape of investments, and all this has been turned over.
The hon. Member for Nottingham, South, suggested that in return for all this the Prudential Assurance Company should give to the Government some debentures—I believe that that was the blackmail that was offered. I am a great believer, and always have been, in the view that the less the Government have to do with industry the better. I still say that, in spite of the many changes we have seen over the last six years.
If the Minister cannot accept the Bill in its entirety, I should like him to consider whether something can be done to allow the general public to get the matter in a fair perspective and have a fair idea of what is a proper return on the capital employed in a business. There is a great deal of loose talk with regard to percentages and dividends, and a great deal of misrepresentation has taken place over the past few years.
If we could get some means of showing exactly a true and proper return, it would be in the interests of all the people in this country. That is the reason I felt I should say a few words. Knowing that there are several hon. Members who wish to speak and that there is another matter to be discussed, I will content myself with that short statement in support of the Bill.

3.10 p.m.

Mr. Austen Albu: I do not know whether the remarks of the hon. Member for Hallam (Mr. Jennings) have greatly assisted the mover and seconder of the Motion for the Second Reading of the Bill, for, while watching them during his speech, I thought they looked slightly disquieted because he was giving away entirely the real purpose

of the Bill. Its purpose has been described in the Press, in the financial columns and otherwise, as a psychological one.
The Bill would not in any way assist the managers or even the accountants of industry. If that were the case, I cannot help feeling that the very eminent Committee under Lord Justice Cohen would have made such a recommendation, but they said at the time they examined the matter that there was in fact no demand for such a Measure, and that there were considerable difficulties and dangers about introducing such a Measure. Therefore they did not so recommend.
I think it was the hon. Member for Dover (Mr. Arbuthnot) who said in seconding the Motion, that the conditions have considerably changed since and that, with the fall in the value of money, the rise in prices and so on, there was now an increased reason for introducing such a Bill. My hon. Friends who have moved and seconded the Amendment have dealt partly with that matter, and I intend to deal with it myself. I hope it is not the case, as was suggested, that it will be another 20 or 30 years before we have another Companies Act. My complaint about the Bill is not that it is too narrow, but that it is not wide enough. There are many things which need to be done about companies, many changes required in company law to bring it into relation with modern social conditions, with the actual structure of industry today, and with the real position of the partners in industry.
I would not be prepared to vote for such a narrow Measure, which deals only with one small psychological factor. The hon. Member for Hallam said that he was in favour of the Bill because it would assist in presenting to the general public —I think he said the electors and I suppose he meant chiefly the workers—the truth about companies and about capital in companies. But he disclosed in his own remarks how very little he understands of the real nature of the company structure of our industry at present. The whole of his arguments were directed to that relatively small part of our economy which is still in control of private companies and family businesses. I suggest that this Bill has no relevance to those at all.
It is a Bill directed towards the large public companies whose shares are freely transferable, and generally—although not always—quoted on the Stock Exchange. From the psychological point of view, there is no particular advantage in the case of the private companies. As the hon. Member knows, their accounts are not published and no one knows what are the profits they make, except for the small number of highly progressive concerns who take the precaution of explaining the figures to their own workers and getting their agreement. For instance, there are the Glacier Metal Company and companies of that sort. [Interruption.] I am sorry, the Glacier Metal Company is a public company, but there are some private companies which do that.
In general, this Bill applies to the large public companies generally with some tens, or even hundreds, of thousands of shareholders—that property-owning democracy of which we have heard so much, the 1,250,000 shareholders in this country who are so distributed that 2 per cent. of them own more than one-third of the total shareholdings.

Mr. F. J. Erroll: The hon. Member will not forget the very extensive shareholding of the trade unions in industrial organisations, representative of many millions of shares.

Mr. Albu: I welcome the intervention of the Parliamentary representative of the Institute of Directors. It is a fact that the trade unions have a substantial shareholding, but I imagine that they are by statute not allowed to hold equity shares. Most of their investments are in statutory authorities, Government stock or nationalised industries, etc. There may be some cases in which they hold preference shares or debentures in private companies—I believe they used to do so in the case of the railways.
I am not denying that; it is, of course, perfectly true that a fairly large amount of the small man's savings reach the larger companies and some of the smaller companies today, through the institutional shareholders, such as the Prudential, to which my hon. Friend has referred, I suppose that is the way in which most of those companies receive their capital today.
But, of course, by the way in which that capital is invested, control over the management and the efficiency of the companies and all the normal classical functions of the shareholder towards a company are exercised, not by the saver himself, but by that very small number of men at the top of the managerial society to which my hon. Friend referred, the directors of those investing bodies: the financial trusts, insurance companies, etc.
Let me return to this question of the actual structure of industry and to reply to what the hon. Member for Hallam said. I do not think it would make a great deal of difference, nor do I think that I should have any particular objection, to such a Measure being introduced if it were confined to private companies or, rather more narrowly than private companies, to those companies in which the management, directorship and shareholding are closely associated; in other words, those companies in which the direct incentive to efficiency, enterprise, etc., is the profit which the shareholder is to get. That is very different, as we all understand, from what takes place in the large public companies to which I have been referring.
In the case of private companies, this Bill does not matter because their figures are not disclosed. When they are converted from private into public companies, exactly what the hon. Member for Middleton and Prestwich (Sir J. Barlow) wants takes place at that moment, because the shares are then given the real value which the assets have reached. The shares are put on the market and sold for something which the Stock Exchange and investors feel is the true value of the business at that time, so that what the hon. Member proposes is done.
It is from that point onwards that we have to consider the position rather more closely. I think the hon. Gentleman would agree that his Bill is directed towards the affairs of public companies, those companies whose shares are quoted on the Stock Exchange, whose balance sheets and accounts are open to public inspection and which are frequently the subject of debate in this House or, as the hon. Member has said, of propaganda.

Sir J. Barlow: The Bill would apply both to public and private companies.

Mr. Albu: Yes, it would, but I think the hon. Baronet would agree that it would not make a great deal of difference in the case of private companies. We have to think very carefully about this question of the public company. We are agreed that no substantial advantage to the management, or to accountants, or indeed to investors really accrues from the introduction of this Measure. The only advantage claimed for it so far has been to throw dust in the eyes of those working in the companies or those who like to criticise. I think that is completely wrong, and I support the Amendment moved by my hon. Friends for very much the same reasons as they have adduced.
It seems to me right that we should bear in mind the very great increases in the value of the shares of people referred to by my hon. Friend the Member for Uxbridge as absentee shareholders, for the reason that they play no part in the management of the business at all. Time after time it has been pointed out by people of as great authority as the late Mr. Hargreaves Parkinson himself that there is an automatic increase in that value—or rather, as I see that the hon. Member for Barnet (Mr. Maudling) will be speaking shortly and I know he will correct me and bring me up to date—it was the case, because it is perfectly true at the present time that shares in this country do not stand very much higher than before the war.
All this has nothing to do with the management of a business. The change in the value of shares has come about entirely because of the change in the Bank Rate and the increasing stringency of the Chancellor towards the capital market. It has nothing to do with fluctuations in business profitability, the efficiency of the industry and so on. So I would warn any hon. Member that I should not consider his argument at all seriously if he says, "You cannot only talk about increases in the value of company shares; you also have to take into account the losses."
Before the days of very high profits taxation and before the time when the operations of the Chancellor of the Exchequer were of much more importance to public companies than even the efficiency of their management, it was the

case that, taking it over, say, a seven-year period, the value of shares on the Stock Exchange was continuously rising. Everybody knows it, and the argument for investing in ordinary shares, particularly during an inflationary period, was that if one could hang on to them long enough they were a hedge against inflation.
We on this side of the House cannot accept the view that any investor has the right to an automatic hedge against inflation not held by those who invest in gilt-edged or fixed-interest stocks. There are in that connection two different arguments. There is the argument used by the hon. Member for Hallam about private companies and about the man who goes into business and builds up his business for himself, and so on. We all accept those arguments.
There is a different set of arguments about public companies. We support the necessity for re-investment out of profits in the public companies, but what we are not prepared to accept is that it should be made any easier for the very small number of people who do invest their money in ordinary shares in public companies to be entitled to this additional appreciation to the value of their holding which is not an advantage open to those who use their savings in other ways.
It seems to be completely out of keeping with the actual nature of industry today that the theory, if it is a theory, that all the surplus earnings should belong to the ordinary shareholders should any longer be the case. One of my hon. Friends referred to the shareholders as owning the company but they do not even do that. The position about what shareholders own is not clear. It was held by no less an authority than Lord Justice Evershed, in the case of Short Brothers during the war, that shareholders do not in fact own the assets of the business.
This argument was used in the debate on the nationalisation of the iron and steel industry, in reply to arguments put by hon. Gentlemen opposite. What it is that the shareholders own is something which I think only a lawyer can explain, and perhaps my hon. and learned Friend the Member for Kettering (Mr. Mitchison) will have an opportunity to explain it. The shareholders own shares, giving them certain rights. If they can get a large enough number of them together each year they can call a general meeting.
These rights, in theory, include that of appointing and of removing directors, which, in practice, is a right which it is almost impossible to use.
As to the profits and so on, it is perfectly true that they have the right to reduce the dividends which the directors propose, though I do not think they have the right to increase them. If the company is to be wound up, they are entitled to whatever is left after the creditors are paid.
These are very unreal considerations for the type of large public company that we are now considering. They are very real considerations for private companies, but quite unreal in the case of public companies. Anybody who cares to examine the figures of forced liquidations and bankruptcies over the last 25 or 30 years will see that the risks in managing a public company, or the risk of investing money in these companies, providing it is spread out sufficiently broadly, are very unreal indeed. The shareholders are rewarded by dividends, on the one hand, and, what is more important in relation to this Bill, an increase in the value of their shares, on the other.
It is extremely important that, if we make changes in the law relating to companies, we should make changes at one time, and not make these changes only dealing with one aspect or from one point of view; that of the share-holders. We have to make changes in the structure of companies which distinguish clearly between public and private companies, between a public company with shareholders who play no part in management and have no control, and private companies, particularly the private companies where the managers and directors are themselves shareholders or are closely associated with the shareholders, and where something like the classical theories of private enterprise really operate.
If we were to do that, it would be much easier for us to accept a proposal of this sort for amending company law, but I should want to point out other changes. For instance, if the arguments put forward by my hon. Friends and myself were accepted, I should want to see some form of permanent dividend limitation in public companies, and that would have to be accompanied, in my opinion, by some way of preventing the distribution of capital of the company in the form of

bonus shares. It is very important that these changes should take place, and that we should not allow ourselves to be fobbed off with something, as the hon. Member for Hallam said, for psychological reasons or propaganda reasons, purely because hon. Gentlemen opposite have guilty consciences about what takes place in these large public companies.

Mr. Jennings: Does not the hon. Gentleman realise that untold harm has been done by his own party in misrepresenting the whole position with regard to dividends and the return on capital, which has been going on for years?

Mr. Albu: I believe that a great deal of harm has been done by misrepresentation of the nature of companies, and I have been spending the last five or six years, and while I have been in this House, in trying to put it right.
There is no doubt at all that one form of misrepresentation is to try to pretend that all joint stock companies are of the same nature, and I am glad to see that the hon. Member for Hallam agrees with me. I think we should get a great deal further if we made a clear distinction between a private company, or a company in which the shareholders and managers are really much the same people, and public, managerial, bureaucratic companies, which represent something like half of the whole economy of the country. It is all very well for hon. Gentlemen opposite always to be attacking us for our nationalisation Measures, and for creating giant managerial bureaucracies, but they never say anything about those created by the large joint stock companies, with atomised shareholders who play no part in them at all.
I recommend to the hon. Gentleman that he read, for instance, a recent article on this subject by a highly intelligent French political writer, M. Bertrand de Jouvenal, in a Belgium paper called Industrie. In that article entitled Vers Une Collectivisme Pluraliste, the writer points out the true nature of these public companies today. He says, for instance, as hon. Members on both sides of the House have agreed, that the State has a very large interest in these companies and very often a larger interest than the shareholders. This applies not only in this country, but also in the United States, where the figures are almost identical.
He also points out that these companies are no longer subject to control by the shareholders but by a small managerial bureaucracy. Anybody who has worked in companies of both sorts, as I have, knows the great difference in temperament, attitude, and everything else of those companies.
For all these reasons, I feel that this Bill is too narrow and that we want a very much wider Bill. In my opinion, this Measure is not worthy of the attention of a Standing Committee, because in Standing Committee we cannot do anything to enlarge the scope of a Bill. I should like to see a much wider Bill, and for these reasons I ask my hon. Friends and hon. Members opposite to support the Amendment.

3.32 p.m.

Mr. Ralph Assheton: I wish to intervene in this debate this afternoon in order, partly, to clear up one or two misunderstandings which I think exist between both sides of the House. I think it would be a good thing it we could have a working party consisting of hon. Members from both sides to try and get some accepted facts about these matters. Though there is a tremendous lot of common ground between us, misrepresentations are continually being made which lead to great public confusion.
If the hon. Member for Uxbridge (Mr. Beswick) will allow me, I will refer to his speech in order to illustrate my point. He referred to a great insurance company in this country, which, as he told the House, started from the small capital of £5,000 odd, and which may very well be true. He went on to say that the present value of the shares of that company amounted to many millions, which is also true. But he did not tell the House that in between the time the company started and today additional capital had been subscribed for cash by the shareholders.

Mr. Beswick: If I made a mistake, I made it in good faith. The point of my argument was that as far as I understand this—and I take my stand on the Beveridge Report of 1942—no other capital was in fact subscribed from outside.

Mr. G. R. Mitchison: Is it not perfectly clear that anyone who subscribed £1 to the Prudential when it

began would have seen a very large increase in the value of his shareholding as the years went by? The question is whether that increase is excessive, as the Beveridge Report obviously thought it was.

Mr. Assheton: I was not seeking to argue that point at all, but merely to point out to the hon. and learned Gentleman that he was inaccurate. I will now refer to a book which is in the Library of this House—the Stock Exchange Official Intelligence—and it would be a good thing if hon. Members confirmed their facts by reference to it. If hon. Members will look at that book they will see, for example, that the latest issue of shares for cash in that company was an issue of 250,000 shares to shareholders at £5 a share in 1929. That means shareholders put up £1,250,000.
This illustrates the gross inaccuracy of the sort of statements which are apt to be made from the other side of the House, I am sure purely in ignorance. That is why I suggest it would be useful to have a working party together so that the facts might be established. If we know the facts we can start arguing about what is right and wrong; but it would be good to have the facts established first.

Mr. Mitchison: Would the right hon. Gentleman allow me to correct—

Mr. Assheton: No, I am sorry I cannot give way. I promised to speak for only a few minutes and other hon. Members wish to speak. I am quite willing to argue the matter with the hon. and learned Member some other time.

Mr. Beswick: I am prepared to accept the correction, of course, but would the right hon. Gentleman make it quite clear whether the £1,250,000 was contributed by shareholders as new capital or whether it was a capitalisation of reserves in the name of the shareholders?

Mr. Assheton: There is no doubt about it. It was an issue to shareholders in November, 1929, for cash, that is new money put in the business. I am not seeking to draw any argument there but am trying to point out that the hon. Member's facts are wrong and that therefore he must not base conclusions upon them.
I come now to the main point of the Bill. It was rather suggested by hon. Members opposite that the proposal made by my hon. Friend the hon. Baronet the Member for Middleton and Prestwich (Sir J. Barlow) was a sort of camouflage proposal. I want to point out that this question of the nominal value of shares is very confusing to the public and particularly to small investors. If a share is issued at £1 it may be that in 10 years' time, if the company has done well and been successful and perhaps put aside a good deal of money, that the share may be worth 30s. and maybe in another 10 years worth £2.
It may equally be the case, as it was with the great railway companies, that an investment of £100 made many years ago, after the course of years was only saleable in the market for say £20 because a great deal of the money had been lost. There is something to be said for the argument that the nominal value of the share does not give investors a very effective picture of the position. When some years ago a man was able to buy London Midland and Scottish £100 stock for £25 he was apt to think that he was really buying £100 in value for that money and that one day the £75 would be added to his £25.
He was misled by the nominal value of the stock. One can be misled just as much when stock has fallen and the nominal value is higher as when the real value has risen and say, a 5s. 0d. share is worth 15s. 0d. In neither case is the investor, who is often not very expert in the matter, given a clear picture of the position by the nominal value.
If the shares of no par value are created one is not prescribing any particular value to the shares; and there is a lot to be said for it because at a given moment it would be difficult to say exactly what was the value of a share. It is not like a debenture where one lends £100 to a company and a company may be pledged to pay it back some day. This is the case of ordinary shares of a company which are constantly varying in value as the company prospers or declines.
There is something in what has been said from the benches opposite—that this Bill covers only a narrow point—and it may be that the Parliamentary Secretary to the Board of Trade may tell us that

the Bill does not fit absolutely easily into the superstructure of the Companies Act and is too complicated to be accepted as it stands. Whether that is so or not, I believe a great deal of trouble has been taken in drafting it, and I hope that the Government will give very serious consideration to this matter because at the time of the Cohen Committee a great deal of consideration was not given to it. Since then considerable thought has been given to the matter, and various authorities who at that time had not considered it carefully have now come to the conclusion that there is a good deal to be said for permitting the system of no par value shares.

Mr. Beswick: Who are they?

Mr. Assheton: It has been in use for many years in America, as hon. Members may know. A great number of companies in America have that particular structure, and I personally think that it is quite possible that it might provide a useful addition to our financial mechanism. I only want hon. Members opposite to give the matter another thought and ask themselves whether perhaps there is not more in this idea than at first appears.

3.41 p.m.

Mr. Glenvil Hall: There are still one or two of my hon. Friends whom I, for one, would like to intervene in this discussion, and we have now only 20 minutes before we have definitely to conclude this debate. I realise too that the Parliamentary Secretary must say something.
I listened to the persuasive speeches of the mover and seconder of the Motion, but I must say straight away that they failed to convince me. I thought the whole tenor of what both of them had to say was lukewarm. Obviously they were anxious to forestall criticism if they could. They were, in my view, defensive throughout.
The hon. Baronet who moved the Second Reading of this Bill indicated that since the Cohen Committee's Report was issued, there has been a very great change of view on this matter, but he did not give us much evidence in support of that. He indicated that certain people had written to him, and I of course, do not question that. But quite a lot of people can write to a Member and still be a


very small minority of the electorate he represents. It is interesting to remember that when the Cohen Committee's Report was issued, attention was called to the fact that the Stock Exchange, the chartered accountants and the Association of Investment Trusts were against N.P.V. and that the Federation of British Industries, a very important body, and the British Insurance Association ignored the inquiry.
Supposing that all these very influential bodies in their own sphere are today heartily and enthusiastically in favour of this change, I would ask, if they are now in favour of it where the evidence is. There are people no doubt who are anxious to get a change of this kind instituted. The hon. Baronet indicated that this Bill would be permissive anyway. I do not think that is an argument in its favour; I think it is an argument against it, because it goes to show that those who would use it would be those who would gain by it, and the people who would gain by it, in my submission, would be those who, in the words of the Cohen Committee's Report, would be enabled thereby to manipulate changes they were anxious the public should not know very much about.

Sir J. Barlow: The right hon. Gentleman has raised this point about the opposition to the system. I have a letter here from the Association of Investment Trusts who now give complete support, and they deny the report in "The Times" that they disliked it at the time of the Cohen Report.

Mr. Glenvil Hall: I accept what the hon. Baronet says, but I cannot answer too lengthy an intervention because there are others who desire to speak.
I thought that the speeches made by my hon. Friends the Members for Nottingham, South (Mr. Norman Smith) and Uxbridge (Mr. Beswick), in moving and supporting the Amendment for the rejection of this Bill, were extremely forceful and very much to the point.
My hon. Friend the Member for Nottingham, South referred us to Canada, and reminded us of what is undoubtedly true, that in Canada this thing was tried but quite soon they had to go back on it. The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) said that in the United

States they had this type of issue, but, I would remind him that even in the United States the enthusiasm of many people for this is not now what it used to be; in fact, from all that I hear, companies and promoters are using this kind of procedure less and less.
I could, of course, have a good deal to say on the point, raised by many hon. Members in this debate, that all the promoters want to do is to prevent investors from being misled. I am not at all sure that we can prevent by law an investor from being misled, though I do believe that, as the years go by and people become more and more educated, it will be less easy than it was to mislead investors.
Finally, may I say that, although it has been said that the point raised by the, Bill is a narrow one, it does amount to a very substantial change in the law. I, for one, regret very much that this Bill has been introduced as a Private Member's Bill. We have such a wide field open to us when we have these discussions and introduce these Bills on a Friday that I think it would have been better, if today we had had a Bill of a different kind from the one which has been put before us. We have to remember that if we agree to this Bill today, it will go upstairs and may block the passage of a Bill to which more Members would give their support and which a larger majority—if there is a majority for this Bill—would desire to see passed. There is no urgency for this Bill, and on that ground, if on no other, I ask the House to reject it today.

3.48 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. Henry Strauss): I am obliged to the right hon. Member for Colne Valley (Mr. Glenvil Hall) for his brevity, and I also propose to be extremely brief, especially as I wish to sit down a few minutes at least before the hour. In the short time at my disposal, I think that perhaps I had better try to distinguish between the general case that has been argued and the particular Bill to which it is sought to give a Second Reading.
On the general case which has been argued—the case for allowing shares of no par value—there is a great deal to be said for it and most respectable economists and others have been in favour of such a reform. I think that the hon.


Member for Edmonton (Mr. Albu) was most unfair when he said that the object of the proposal was to throw dust in the eyes of the public. There may be a question of what is the best way of revealing the truth to the public, but it is only fair to say that very respectable advocates of this reform put it forward precisely because the compulsory nominal value of a share is, in itself, in certain cases extremely liable to mislead.
I will not repeat but merely refer to the very respectable findings of the Committee which sat under the Chairmanship of Mr. Justice Cohen as he then was. If hon. Members will examine paragraphs 17 and 18 of that Report they will know that that Committee thought that there were respectable arguments for this reform, though they rejected it at that time for the reasons which they gave.
I will remind the House of one of the respectable arguments to which they alluded:
It is argued that to attach a nominal value to a share is misleading as, except perhaps immediately after the formation of the company, and not always then, the nominal value bears no relation to the real value of the share….
Therefore, I will not say a word against the theoretical case for this reform, which is perfectly respectable and has received wide support from many thinkers on this subject.
Unlike the right hon. Member for Colne Valley, I thought the best arguments in favour of the reform were, perhaps, not those of my hon. Friends who moved and seconded the Bill but those of his hon. Friends who moved and seconded its rejection. I thought the hon. Member for Nottingham, South (Mr. Norman Smith), and the hon. Member for Uxbridge (Mr. Beswick) gave so many fallacious arguments that one began to think that the case for the reform was even better than it had appeared.
The hon. Member for Nottingham, South dealt with the case where money which might have been distributed to shareholders was placed to the reserve. He said that if that were done—he described it at length—the compulsory description of the share by its original par value gave a truer account of the real position than the reform advocated by my hon. Friends. But is that so? The very case which the hon. Member took, of distributable money being placed

to the reserve, may afford strong support for the very reform which has been advocated.
The hon. Member for Uxbridge gave some very astonishing figures about an insurance company. Since I think that should not go out uncontradicted, I am bound to say of the assets of the Prudential Assurance Company that at least £575 million out of the £600 million is held in trust for the policy holders, and it may be substantially more. That was not the impression given by the hon. Member.
Both the hon. Member for Uxbridge and the hon. Member for Edmonton (Mr. Albu) used the astonishing phrase —the hon. Member for Edmonton had used it before—of "absentee shareholders." Presumably that means shareholders who do not live above the works. If those hon. Members will consult persons who are familiar with town planning they will find that it would not be to the advantage of anybody if all shareholders lived above the works. Let them think of the contribution that joint stock companies have been able to make to the industries of this country. The whole purpose of the invention of joint stock companies was to enable shareholders to be absentees.
So much for the reasons why so many of the arguments used against this reform simply will not do. Let me now come to the actual Bill. After saying what the theoretical case might be for such a reform Mr. Justice Cohen's Committee pointed out—rightly, I think, in the view of all hon. Members, however much we may otherwise be divided—that such a reform would need numerous safeguards since otherwise it would be capable of abuse.
There are great technical objections to the Bill. Needless to say, I do not blame my hon. Friends who tackled this extremely difficult and intricate subject —I agree with the right hon. Gentleman the Member for Colne Valley that this is not a very simple reform—for not having surmounted all the difficulties.
The technical objections are substantial. Whether or not the Stock Exchange might be in favour of the general reform that has been argued, it is certain that they would not support 'the present Bill, and it is clear that, if such a reform were to be incorporated in our law, the


accounts and other provisions of the Companies Act would require to be radically amended to enable this reform to be made with safety. I will give one example, which I do not know whether hon. Gentlemen who support the Bill have detected. If the Bill became law, it would be impossible for a company which had shares of the nature now advocated to acquire in exchange for its shares the business or shares of any other company. That is a fairly substantial limitation. I could give other examples.
The fact is that before we adopted any reform of this kind the matter would have to be examined fully by experts. I do not know any case in theory against shares of no par value, but I believe that the importance of the reform has been exaggerated both by those who advocate it and those who oppose it. There is no way of ensuring that people may not be misled, whether we make this reform or do without it, though I think there is much to be said for the view of my hon. Friends that a truer picture might be given in many cases if the reform were allowed.
Like the right hon. Gentleman who spoke from the Front Bench, I have made such inquiries as I could about experience in America. They are not sufficient to enable me to say anything very confidently, but what I learned agrees with what the right hon. Gentleman said, namely, that the view is by no means unanimous there.
For these reasons—although there is much that can be said for it in theory—expert inquiry would be necessary before the reform could be embodied in an appropriate Measure. I could not advise the House to give a Second Reading to this Bill.

3.58 p.m.

Mr. G. R. Mitchison: Deeply though I appreciate the unusual honour of catching your eye, Mr. Speaker, I have little time to express my gratitude fully. The Cohen Committee's Report was concerned, among other things, with ensuring that full-understanding of the operations and position of a company was afforded to shareholders and those outside the company.
In considering this particular proposal, it is extremely significant that the Cohen Committee concluded that it did not

bring any of the major subjects of the inquiry nearer to solution. It follows, therefore, that they decided that this proposal would not contribute to the elucidation of the proper position of the company even among shareholders or among those outside. They rejected the proposal, not merely upon that ground but upon the further ground that it would open the door to manipulation of the balance sheets and the statements—

It being Four o'Clock, the debate stood adjourned.

Debate to be resumed upon Friday, 14th March.

CHILDREN AND YOUNG PERSONS (AMENDMENT) BILL

Read a Second time and committed to a Standing Committee.

Orders of the Day — SELF-HELP HOUSING ASSOCIATIONS

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Butcher.]

4.1 p.m.

Mr. Martin Lindsay: I hope this Adjournment period will be useful in giving an opportunity to the Government to state their policy in regard to the numerous associations which are now springing up all over the country for the purpose of their members building their own homes. It happens that there are more self-help housing groups in my own constituency of Solihull than in any other. This is partly because the first of these associations, that of the Post Office workers, started in the neighbouring City of Birmingham, but chiefly because we are fortunate in having a progressive urban district council, which believes in private enterprise, and enlightened officials. They appreciate that these groups of fine young workmen are performing valuable pioneering work, and have therefore given every possible encouragement to them.
In consequence, we now have in Solihull no fewer than nine self-building groups in course of building, and several more which are in process of training and formation. There are some 100 of these associations in different parts of the


country at the present time, but I am sure that the number will grow rapidly.
I believe, therefore, that the time has now come for the Government to give considerably more thought to the housing contribution which these groups are capable of making and to the problems which they bring in their train. The most important of those problems is the question of relations with the trade unions if, as is likely, these groups grow to mammoth numbers in a few years. I trust the time will never come when there will be opposition to men building their own homes in a free country. Nevertheless, the relationship with the unions is something which must be considered in good time.
I want the Minister to realise, if he does not already, what an immensely valuable building potential these groups are at a time of great national labour shortage. In my constituency, I hope we shall complete 80 to 100 houses this year and about 150 in 1953. Taking this figure of 150 houses, if self-help groups would average only half this level of production all over the country, it would be equivalent to 47,000 houses a year—a bonus of 16 per cent. on the Government target of 300,000 houses a year, without any call upon the normal building labour force.
I therefore believe that the Government should do all they possibly can to assist well-managed building groups to come into existence all over the country. The housing need is there, the latent will to build is there, and what is required is technical assistance in the initial stages, such as guidance through the immense legal and administrative difficulties, which cannot possibly be envisaged by the ordinary man wishing to work in a group.
There are three agencies which the 'Ministry should use to promote these groups. First, of course, there are the local authorities. Every authority could organise a section of its public works department to supervise and direct a number of these groups. The second agency is industry. In one or two cases companies such as, for example, Dunlop's and Cadbury's, in my own district, have helped societies from among their own work-people to get on their feet, not by financing them, but by providing the technical services of their own consultants, such as

the company's lawyers. I am quite sure that very many companies would be glad to do the same if their attention were drawn to the possibilities.
Then there is the possibility of voluntary bodies, such as the Rotary movement, which normally has in it the cream of local business talent. Incidentally, the Rotary Club of Chichester is already doing valuable pioneering work in this field.
It would be exceedingly difficult to find a movement more deserving of encouragement. What these men are doing is most impressive, working at weekends and in the long summer evenings, or, at the present time, by are lamps until 8 o'clock on Sunday nights. If the Minister could spare a weekend afternoon, there is nothing I should like more than to take him round from one group to another in my constituency and let him see them actually on the job.
These are the men with guts and enterprise, who are getting on with the job instead of waiting for something to be done for them. Often they work a 78-hour week, whilst being paid for working 44 hours. I like to think that they are typical of what we hope are going to be the new Elizabethans.
The Assistant Postmaster-General has told me that it is noticeable how the character and initiative of the men who have worked in the Post Office group have been developed by this experience. From what I have seen of them, I believe that these men are typical of the best human material, and that this experience will develop their characters and personalities so that they will be of increasing use in industry, and that many of them will in consequence gain promotion.
I suggest that the Minister should give local authorities much more guidance. At present, local authorities in London and the South seem to be in doubt as to what these housing associations are able to do and are continually referring to Birmingham, Solihull or Sutton Coldfield.
I should like my hon. Friend to get out a simple pamphlet, so that we would have something to give these men when they ask us how to set about forming a group, and be able to tell them how to proceed. I should like him to consider the whole question of publicity which should be given, bearing in mind its effect upon the


public, upon trade unions, and upon local authorities.
One of the things that we need to ensure at this stage is that it is made as difficult as possible for undesirable people to get hold of these associations. By this I mean people who grossly overcharge these men in return for piloting them through the veritable mass of legal and financial difficulties connected with getting a building scheme going, and for providing technical assistance in the course of building operations. I am not suggesting that unscrupulous promoters have as yet got hold of these societies, but there is a great temptation and a danger.
These societies need the best kind of working rules, in the simplest form, and there is need for special guidance and co-ordination. Sixteen years ago, the Government set up an organisation for this very purpose: that is to say, to safeguard the interests of housing associations; and ever since then the National Federation of Housing Societies has received an Exchequer grant.
But we cannot insist upon a closed shop, and the fact is that at the present time only 15 of these associations have in fact joined the National Federation, and the remaining 80-odd do not belong to it. The Federation can be of great assistance to these housing associations in seeing that they are properly conducted, that their long-term finance is sound, and that they have all the benefits obtainable under the law, such as, for example, charitable registration with exemption from Schedule A Income Tax.
As we are not going to insist upon the closed shop, we must, I think, rely upon the local authorities. Particulars of each housing asociation must pass successively before the housing committee, the finance committee, and then the full council, and finally go to the regional office of the Ministry. I want the Ministry to ask the local authorities to give guidance, where necessary, in regard to the constitution of these schemes, and to make sure that their trust deeds are well drawn up, that they have a properly worked out rent formula, and so on, so that abuses do not take place.
The relationship of these groups with their local authorities is very important, and little would be achieved without full co-operation. Previously local authori-

ties used to be suspicious of these groups, regarding them as people who wished to jump the housing queue, particularly when they came from across the boundaries of another authority. But the Minister's wise statement that local authorities could expect to get an unlimited number of additional licences in accordance with building progress made, has removed this suspicion, and given local authorities much greater confidence, as I myself experienced when I took a deputation from my own local authority to see the Ministry's regional officer, to return with 281 additional licences.
Nevertheless, I am quite certain that the Ministry must give much more guidance to all local authorities on the encouragement and assistance which, in my opinion, should be given to these societies. The local authorities have big responsibilities in regard to designation and amenity planning, subsidy and mortgage facilities, and so on. Working together, the local authorities and these self-help housing groups, with proper encouragement and help from the Ministry, can make a great and novel contribution to housing problems, such as we all desire to see.

4.14 p.m.

Mr. Julius Silverman: I am very glad the hon. Member for Solihull (Mr. M. Lindsay) has taken the opportunity of bringing this matter of self-help housing associations before the House. He and I stand in this relation, that the Birmingham people, like those in my constituency who build the houses, go to the constituency of the hon. Member, and he is at the receiving end as far as the houses are concerned. It is the Birmingham artisans and workers who build these houses.
The hon. Member referred particularly to one scheme in his constituency, that is, the Fortitude Housing Association connected with the Dunlop factory. There are 50 men involved, and the lastex section of Dunlop has given them every assistance in developing their training. Some of them, of course, were building workers before they went into the factory. They have contributed something like 12 houses up to the present. It is very obvious that schemes like this can make a valuable contribution to the housing problem in places like the Birmingham area.
In Birmingham we have a housing waiting list of about 60,000 and people who are coming into the city far outnumber the number of houses which are being built by the local authority. The bottleneck in Birmingham is not so much building material as shortage of building labour. The consequence is that these people are building in the Birmingham area houses which would otherwise not have been built. That is the important point to remember.
I made representations to my hon. Friend who was Parliamentary Secretary in the last Government on this matter. It is fair to say that the last Government took the initiative in giving extra licences for these houses. I am glad that the present Government are at least reverting to that policy and giving extra licences to cover these schemes, because such schemes are undoubtedly a valuable contribution to the total solution of the housing problem, especially in areas like Birmingham.
I do not entirely share the optimism of the hon. Member for Solihull about these schemes spreading like wildfire throughout the country. In areas where the shortage of building labour is the key problem—and I think that Birmingham is a very special case in that respect, though some other authorities may be in the same position—there is ample scope for these organisations. Frankly, I do not think that there will be a demand from many other areas, and I am not sure that it would be altogether desirable to allow these schemes to develop to an unlimited extent.
I am glad the hon. Member for Solihull raised the question of control and the scrutiny of every scheme, because it is most important that that should be done. If such schemes are limited to the places to which they are proper—and I do not think there is the danger of an excessive extension—there will not be any clash with the building unions. It is obvious that the minds of members of the building unions must always hark back to the position which existed in the early '30s when many thousands of men were out of work, and the days before the war when it is true to say that at no stage were there fewer than 10 per cent. of the building workers of this country unemployed. It is very natural that they

should be on the defensive because of the fear that those times may perhaps come again. That is perhaps why they look askance at these schemes.
I do not think that they need have any fears of that for a long time to come. I understand their natural reaction, but I do not think there will be any difficulty. In certain other areas in which there is a reasonable supply of building labour—and there are such areas—it would certainly be rather more difficult to justify these housing associations because it must be borne in mind that they are getting a share of building materials and labour which are in short supply throughout the country, and in that sense those concerned in them are getting in front of other people. That must always be considered.
In areas like Birmingham, however, there is the strongest possible case for these schemes and I hope that the Government will listen to the hon. Member's plea and give these organisations all possible assistance. There is no doubt that they are doing a good job not merely for their members but also in their contribution to a solution of the terrible housing situation in cities and areas like Birmingham.

4.19 p.m.

Brigadier Terence Clarke: I am very glad of the opportunity to support my hon. Friend the Member for Solihull (Mr. M. Lindsay) and the hon. Member for Erdington (Mr. J. Silverman). For a long time my constituency, which was badly blitzed in the war, has been trying to secure the opportunity for the building of houses by this self-help method. We have been unable to get licences in the past, but permission has now been given for 40 houses to be built by this method. I share with my hon. Friend the view that this will make a considerable contribution—perhaps not as much as he said, but nevertheless a considerable contribution—towards the solution of the housing problem in this country.
This form of building has one novel aspect. A man has the incentive to build a house for himself, whereas if he works overtime his money is immediately taxed by the Chancellor of the Exchequer and half of it taken away. The sweat of his brow cannot be taxed; but he can build a house in which he can live for


the rest of his life. In my constituency I give every encouragement to this self-help type of building, and if every right hon. and hon. Member gave equal encouragement we should go a long way towards solving the housing problem. In Germany and on the Continent it has been done, and we can do it in this country.

4.21 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Ernest Marples): The House will be grateful to my hon. Friend the Member for Solihull (Mr. Lindsay) for raising this matter, and I confirm what he has said about his own local authority. It is a very progressive local authority and it deals with its allotted task with intelligence and imagination. Solihull is fortunate in several respects. It has a body of citizens determined to help themselves, to roll up their sleeves and get down to some real hard work. They have also shown political sagacity, inasmuch as they have consistently returned my hon. Friend to this House, which shows that they not only work hard, but have wisdom as well.
I would say a word about the self-help groups and the National Federation, which is the central association giving guidance. I refer the House to Section 96 (1) of the Housing Act, 1936:
If a Central Association or other body has been or was established for the purpose of promoting the formation and extension of Housing Associations and of giving them advice and assistance, the Minister may, if he thinks fit, recognise such Association or body for the purpose of this section.
The only body so far recognised for this purpose—and I emphasise that it is the only body—is the National Federation of Housing Societies, whose headquarters are in London. Among their members they have various self-help groups to whom they give assistance from time to time, and any local authority which receives inquiries from a self-help group can do no better than refer them to the National Federation. I will bring to the attention of the Federation the valuable suggestion by my hon. Friend, that there should be a pamphlet setting out under clear headings what a self-help group should do in order to start building for themselves.
I come now to the assistance the Government wish to give to local authori-

ties if they have any self-help schemes in their area. Under the last Government there was a rigid annual allocation of houses given to each local authority. That allocation was rarely altered during the year, whatever the circumstances. When this Government came into office, the system of allocating houses was altered. Instead of the fixed rigid annual allocation we had a flexible series of instalments, and over the next three years we shall have a programme expanding as rapidly as resources permit. By resources, I mean labour and materials.
The initial instalment is made according to the needs of the local authority and taking into account the resources in the particular area. The next instalment takes into account what the area did with the first instalment and what resources are still in the area. It is a sensible flexibility, because if we were too low in our initial estimate we can alter that by giving the authority more in the second instalment.
These self-help groups reduce demands on labour, but not, of course, as the hon. Member for Erdington (Mr. J. Silverman) said, on materials, which have to come from the general pool. We must always bear that in mind. But the duty of seeing that self-help groups are encouraged rests primarily on the local authority and the Minister is considering —and I will bring to his attention the remarks made in this debate—issuing a circular to local authorities for their guidance and setting out as clearly as possible what should be done to assist self-help groups.
But the local authorities have a duty, and, in respect of those houses which they build to let, they must see that they house the people whose needs are most urgent, and, if they give private licences, they must also see that the needs of the selected applicants are comparable with those of people on their own waiting lists for council houses. Local authorities must satisfy themselves by an examination of the constitution of the self-help group, its resources, financial arrangements and the obligations of its members, that there is a reasonable expectation that the group can complete a given number of houses in a reasonable period of time.
If they do that, and if they find that they want an extra instalment, in order to give the self-help group some work


to be going on with, I hope they will go to the principal regional officers of the Ministry in their district, when we will see what we can do to give them an additional instalment. It is up to the local authorities to satisfy themselves that the self-help group can really do the work, and that it has the resources to do it, and in this respect I reinforce what my hon. Friend the Member for Solihull said.
It would be most unfortunate and very undesirable if the self-help groups were to get the wrong advice at a very high fee, and it may be—indeed, in one or two cases there have been Press reports of this nature—that undesirable people get hold of a main housing association and give advice at a fee which is much too high. Therefore, I suggest that the self-help groups should take notice of this debate, and that hon. Gentlemen here should let their local authorities know that, if a self-help group wishes to work efficiently and expeditiously, it should apply to the National Federation.
The Minister wants to do everything he can to assist these groups in suitable cases. Not all cases are suitable, though the self-help group in Solihull is. I hope more like it will be formed.
There is nothing more satisfactory to a man's soul than to do something con-

structive with his own hands. I well remember that, when I was in hospital during the war, the idea of the various physicians, surgeons and psychiatrists was to insist upon all soldiers who had been injured trying to do something with their hands. I remember making an excellent leather case, which I took around with me, until somebody else had the same idea as myself about its excellence and it was suddenly removed from my ownership. It gives dignity to a man, and also gives him self-respect, by making him feel that he is of some use, when he can produce something he has made himself.
Therefore, we as a party, and my right hon. Friend as the Minister, are most anxious that we should help this trait in a man's character. So far as I am concerned, I call attention to the preface to a book which I wrote, which quoted these words:
Now he that planteth and he that watereth are one: and every man shall receive his own reward according to his own labour.
That comes from the First Book of the Corinthians, chapter 3, verse 8. It will assure my hon. Friend that the principles which he has at heart are close to my own.

Question put, and agreed to.

Adjourned accordingly at Half-past Four o'Clock.